Public
Bill
Committee

[Mr
Mike Weir in the
Chair]

Written
evidence to be reported to the
House

WR
26 Shelter

WR
28 Women’s Budget
Group

1
pm

The
Committee deliberated in
private.

1.10
pm

On
resuming—

Q176The
Chair: We will now hear evidence from the Child
Poverty Action Group, Gingerbread, the Fatherhood Institute and Working
Families. For the record, would witnesses please introduce themselves
to the
Committee?

The
Chair: I remind Members that questions should be limited
to matters within the scope of the Bill and that we must stick strictly
to the timings in the programme motion. Time is limited, so I encourage
you to be brief when you ask questions. I remind witnesses that not all
of you have to answer every question if one of you can answer for the
rest and if that is what you
want.

Q
177Stephen
Timms (East Ham) (Lab): The Bill does not tell us anything
as yet about how the Government propose to support the cost of child
care in the future. What would you like to see in the regulations when
they are introduced in terms of what proportion of costs will be
covered and what the arrangements should
be?

Alison
Garnham: What we are keen to see is something that
closely replicates what happens now with tax credits. The original
thinking in the Department for Work and Pensions was about perhaps
introducing a disregard. The disadvantage of that would be that those
on the lowest incomes would not get any help at all, so it is very
important that a payment is introduced that closely resembles what
happens with tax
credits.

Many
of us have been arguing for some time that the payment should cover
100% of child care costs. That is because, at the moment, it is assumed
that parents can make a contribution to the tune of 20%. From April, it
will be 30% because the percentage of child care costs

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covered will be reduced in tax credits. We would like the percentage to
be at least 80% and 90% for families with disabled children. One of the
reasons why that is important is that the amount that parents have to
contribute assumes that there is a shopping incentive. It assumes that
there is some advantage to be had in looking around for cheaper child
care, but of course, early childhood education and care are very
important, and they should be of high quality and benefit the child, so
there is no advantage to be gained from reducing the amount of support
that families
have.

One
of the most important things about child care costs is that, at the
moment, if you look at the universal credit calculations and if you
include child care costs at about 70%, where it is now, the marginal
deduction rates—the amount that you lose per pound of extra
earnings—would rise to about 94% if you have one child, or 98%
if you have two children. It is very important that we have a higher
proportion of contribution than the 70% currently in the tax credit
system.

Fiona
Weir: I welcome the fact that we have heard some
noises that child care costs may be extended to parents who are on
shorter-hours working—under 16 hours a week. That
would be very welcome to a lot of single parents who are quite keen for
their first job to be a mini-job, so we are very positive about that,
but not if it comes from the same size of pot, therefore reducing child
care costs for other parents. Child care is absolutely crucial to
making work pay for so many, so we think it is absolutely essential, if
we are going to make work pay, that more money is put behind delivering
the scale of investment that is
needed.

On
the measures that have been put in place already, we estimate that, for
a single parent with two children who works full time, the drop from
80% to 70% could cost up to £1,600 a year, which is a really
powerful step in the wrong direction for the purpose of the Bill. Our
message is that there has to be money behind child care costs if we are
to make a reality of making work
pay.

Alison
Garnham: One of the problems at the moment with the
work that the Department is doing is that the size of the funding
envelope that is available is affecting the level of support that
people will be able to get. If the ceilings remain as they are now, it
would suggest that the taper rate would fall as low as 60%, and, as
Fiona said, the incentive to work would be very low at that level. This
is an opportunity to make sure that there are very good work
incentives. If instead you had a higher taper rate at about 80%, it
would probably lower the maximum rates that were available from the
fixed pot of money. That is a real concern. In fact, what needs to
happen is for that pot of money to be expanded; otherwise, there would
be a real danger that it would damage parents’ work
incentives.

Q
178Stephen
Timms: Clause 97 of the Bill gives the Secretary of State
the power to split an award where a couple is receiving it. Do you
think that that power will be enough to address the purse-to-wallet
concerns that have been raised around the
Bill?

Alison
Garnham: It is very important that there is some
provision, for two reasons. There are certain types of payment that you
would want to go to the main carer; for example, we would like the
amounts included in universal credit for children and for child care to
go to the main carer. There are other elements such as

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housing costs, where there might be a case for their being made across
to the person who has the liability to pay the rent. It is useful to
have that
provision.

The
most crucial point is that, at present, under tax credits, the main
carer receives all the payment. If the same thing does not happen with
universal credit, it will amount to a serious redistribution of income
away from main carers, most commonly to fathers. That does not reflect
the kind of day-to-day budgeting that actually happens in low- income
households. It is really important, including for the stability of the
relationship, that the payments go to the main carer, who in many cases
is the person responsible for managing family bills and so
on.

Q
179Ms
Karen Buck (Westminster North) (Lab): May I ask about the
implications of the move to bring lone parents whose children have
reached age five into the system, building on what we know has been a
gradual reduction in the child’s age at which lone parents are
expected to go to work? First, what do you think the impact has been of
the reduction so far, staged and proceeding? On the success rates of
lone parent employment, what has been the mix been between
conditionality and incentive? Finally, what are the child care
implications of those
changes?

Fiona
Weir: Specifically around children aged five rather
than the wider questions, I think there is a particular issue around
the 5% whose child aged five has not yet started school. Some
protection needs to be put in place so that they are not required to
work during those early, sensitive weeks. We have some specific
concerns around the fact that for a lot of single parents, it is when
their child goes to school that they start thinking about education,
skilling up and their long-term career direction, and we are very
concerned that a particular group may have those opportunities closed
off to them if they are not fully
protected.

In
terms of the broader experience to date, we have a lot of concerns
about the inflexibility of the system to deal with parents’ need
to be there, and to be responsible for their children. There is not
flexibility in the system at the moment to deal with a child with
health, behavioural or other problems. A long series of flexibilities
have previously been agreed for particular circumstances which make it
easier for parents to combine job-seeking requirements with their
parental responsibilities. As yet, they have not been clearly laid out
again in regulations, and it is not clear how many of them will be
protected and taken forward. If you run through the list, from limiting
working hours to school hours, limiting hours to 16 a week, what
happens when there is an exclusion or parenting order, through to the
domestic violence exemptions, there is a whole series of specific
flexibilities for particular circumstances that need to be in the
regulations that, as yet, have not been laid in connection with the
Bill. They need to be
protected.

Thirdly,
I think we would say that sanctions are largely a red herring. We are
seriously worried that were a sanction to be imposed on a family with a
child, the potential consequences of doing without benefits for such a
long period, even with some access to hardship funds, would be
extremely worrying. We think that they are a red herring because most
of the evidence base shows that we are not particularly effective at
getting people into work. Most people who provide regular employability
training, like us, understand that you get

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people into work through affordability and availability of child care,
jobs being available, particularly jobs with flexible hours, and
high-quality training and support to build confidence and skills. We
are particularly worried about the level of investment going in at the
moment for lone parent adviser training, which all the evidence shows
is crucial to the quality of support that single parents will get. We
are increasingly hearing noises that that provision will be decided at
district level, which again causes concern about the extent to which
the support systems are really
there.

We
think that the Bill hugely swings the balance too much in the direction
of sticks, although there is very little evidence base that they
actually work, and not nearly enough in the direction of support and
making the right kind of jobs available, which we know
works.

Q
180Ms
Buck: That is very helpful. Can I just ask one quick
question—I do not know who is best placed to answer it. Given
the Bill’s incentive to enter work—there is a more
powerful incentive to start work than to increase your hours—and
the recognition of the role of mini-jobs in that context, is there any
issue about the provision of child care, in particular the capacity of
child care to provide cover for mini-jobs, and payment for mini-job
cover, given that most child care providers will insist on sessional or
full-day
care?

Alison
Garnham: That is a big problem with the child care
industry in general. Generally, you do not buy hours of child
care—you buy a session. So you buy 9.30 to 12.30, or
1.30 to 4 o’clock. It is very difficult to buy the number of
hours that you need. Also, age five is a particularly difficult point
for parents. Most people find that pre-school child care is much more
flexible than the child care that is available once your children start
school. Day one at school, you suddenly discover that the school closes
down at 3 o’clock, you have to sort out the child minder picking
children up, and after-school clubs. The reality is that the extended
schools provision that was promised did not really materialise to the
extent that everyone anticipated it would, so you also face the fact
that there is a dearth of child care for school-age children. Just when
you hit the crisis point in child care for age five—and at the
same time hoping that your child settles down at school—you are
asked to think about paid work and finding child care in order
to work. I would argue that five is quite a problematic
age.

Sarah
Jackson: If I may add a point, not just about lone
parents but parents generally, if you are working atypical
hours—if you are not working 9 to 5, or if you work
shifts—it can be very hard to find child care that fits. We
frequently come across examples of parents who are asked by their
employers to work odd shifts or extra hours at short notice. People are
often threatened with losing their job if they cannot find child care
to enable them to do that work. We really have to think about the
interplay between child care provision and working patterns, and the
availability of short, family-shaped
jobs.

Q
181Kate
Green (Stretford and Urmston) (Lab): I will ask some
questions about the social fund, which the Government are proposing to
abolish and pass to local authorities. I would like your views on how
the existing system has been functioning, and how well you think

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the Government’s proposals will serve to replace it. Perhaps
Alison or Fiona might want to concentrate on that
question.

Alison
Garnham: I am very worried about the proposals
connected to the social fund. I never thought that I would be in a
position of defending it, because it has always been seen as quite a
problematic feature of the social security system: it operates on cash
limits, and it is discretionary. There is a bit of a lottery around the
country as to whether you get help, so there is already an issue about
whether the decisions are fair. However, there is an inspectorate that
checks that decisions are broadly being made in the same
way.

The
changes will mean that elements of budgeting loans will transfer to
universal credit, and the advance payments that form part of crisis
loans will also be part of an advance payments scheme in universal
credit, but the remainder will go to local authorities. We have heard
that the money will be sent directly to local authorities but will not
be ring-fenced, and that there will be no regulations or guidance
governing who gets the payments, and no independent scrutiny of how
decisions are made. That is a real matter of concern, because it means
that all around the country there will be different schemes, and we do
not know what those schemes will be or whether it will be possible to
evaluate them, because they will be so varied. We have no idea what the
families that we deal with, who have problems such as their cooker
breaking down, meaning that they need to go to Jobcentre Plus to see
whether they can get help with feeding their children, will meet in
their local area. Will it be a scheme to help with financial inclusion?
Will it be a second-hand furniture organisation that is being
subsidised by the local authority? It is worrying, because families
need consistency and need to know where they can get the help that they
need.

Q
182Kate
Green: Are you suggesting that the potential exists for
there not to be any cash help provided by local
authorities?

Alison
Garnham: Potentially. The money can be spent in any
way the local authority likes. It could be spent developing schemes on
financial awareness, not necessarily on giving people money. There have
been various schemes, right the way back to the supplementary benefit
days, which acknowledged that when you live on levels of income that
are below the poverty line, it is very difficult to save up for one-off
items. There has always been a scheme to help people pay for things
that they need a lump sum for. It is understood that people cannot
possibly save for those one-off items. If the new scheme means that
there will not be any such facility, that presents a major problem for
low-income
families.

The
Chair: I think Guto Bebb wants to come
in.

Q
183Guto
Bebb (Aberconwy) (Con): I am fascinated by the points that
you are making in relation to the local authority situation, because
the implication is that you have no trust in local authorities.
Secondly, you made a point about there being no ring-fencing. Being a
Welsh MP, I am aware of big complaints from local authorities in Wales
that the Welsh Assembly insists on ring-fencing.

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As a result there is no real local variation that responds to local
needs. Surely the potential for a response that is appropriate to local
needs is very strong in a situation where local authorities are allowed
to pursue their own
policies.

Alison
Garnham: But there are a number of questions in
relation to that. Will the local authority be aware of all the people
on benefit, or universal credit, who will be in need of these items?
They are people that the local authority is not currently in contact
with. They are not people who have anything to do with local social
workers, for example. It would be difficult for a local authority to
work out what kind of scheme it needs to put together. With local
variation, however, there will be different schemes in every area. That
may mean that you get nothing in one area, where the authority has
decided one thing, and something else in another. That is out of kilter
with how we expect decisions on social security matters to be
made.

Q
184Priti
Patel (Witham) (Con): To build on that, there are clearly
variations in the social fund and its impact. If awareness is low and
applications and access to finance are patchy, surely going down to the
grass roots and involving councils—I hear what you say about
them not knowing about all the groups out there, but they will, of
course, be working with the voluntary and third sectors in their
community—will mean money is more targeted than is the case
currently.

Alison
Garnham:There will be examples of good
practice, but we also have the history, which is that in the past local
authorities ran schemes such as section 30 payments under the Children
Act. Long ago, when I used to work in citizens advice bureaux, you used
to suggest that people went and applied for that money. In one
council money would be available, but in the neighbouring council there
would be nothing, because it had been spent on something else. That is
the difficulty. When you have families that all have the issue of
running out of money from time to time and have emergencies, there may
be, in some areas, nowhere to go. One of the things that we know about
current social fund applications is that the most common claims are
from families with children. It will have the biggest impact on
families with
children.

Q
185Priti
Patel: On that point, it seems that fairness and access to
funds are at the heart of the issue here. What is the solution that you
propose?

Alison
Garnham: We would like to retain some system of
grants and loans, as we have currently, with a system of guidance and
regulation that would allow people to know whether they were entitled
to make a request for a payment. It would be difficult in other
circumstances to know whether it was worth asking anyone for help.
Transparency and fairness are
important.

The
Chair: We will move on to the next
issue.

Q
186John
Glen (Salisbury) (Con): One of the eye-catching aspects of
the Bill has been the benefits cap—an overall benefits cap for
both single claimants and couples. What are your reflections on the
principle that benefit levels should not exceed what is available or
affordable for working households?

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Alison
Garnham: This proposal mirrors law that existed in
this country in the 1970s but was abolished. At the time, it was dubbed
the wage stop, and the CPAG wrote pamphlets about it in 1970 and 1971.
The problem with it then and the problem with it now is the level of
people’s low wages. We know that two thirds of children live in
families where the parents work, so the level of wages for many
families is very low and does not lift them above the poverty line. By
saying that you want to limit other families’ benefits to the
level of wages that other people can achieve in the labour market, you
create a very difficult situation, and you are actually saying that you
want to suppress benefit levels below the level of their entitlement.
The problem that was created in the past, and which would be created in
the future, is that you would have a new group of people who for some
reason were not entitled to the level that the law says you are
entitled to be sustained at, because wages are so low in the
economy.

Q
187John
Glen: So, you disagree with the
principle.

Alison
Garnham:
Yes.

Q
188George
Hollingbery (Meon Valley) (Con): What you are saying would
be entirely understandable if the level had been set at something lower
than the average, but what is proposed is that the cap be set at the
average household income in the United Kingdom. How does that hold down
people from getting the benefits that they should require? Would you
agree that the biggest flexing figure in there is almost certain to be
housing
costs?

Alison
Garnham: Exactly, and the difficulty is that benefits
such as universal credit are constructed in such a way as to respond to
need. They come up with assessments about what someone needs to live
on. Some people’s needs are greater than others because, for
example, they have a large family, or children with disabilities so
their child care costs are higher, or they are reconstituted
families—two separated families coming together with large
needs. Those are the kinds of families that would indiscriminately be
selected out to have their level of benefit
reduced.

Q
189George
Hollingbery: Two families live next to each other in
identical houses, both with the same housing need, in a slightly more
expensive part of town, and the rent, to the same landlord, suddenly
goes up. One family is in private employment and the other is on
benefits. The family in private employment has to move because they can
no longer afford the rent. Should the family on benefits be allowed to
stay there,
whatever?

Alison
Garnham: At the moment, most people
on housing benefit are in work, so in the case of the
housing benefit cap in the majority you are talking about working
families, not about people living on benefits. Sorry, could you repeat
the end of the question
please?

George
Hollingbery: I see a situation in which someone on the
average household income has to move, when they are working, and
someone is protected because they are on benefits, and does not have to
move. I am just trying to tease out what you mean by
need.

Alison
Garnham: They need to have their housing costs
covered in order to continue to live where they do and not be made
homeless.

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Q
190George
Hollingbery: Or move to somewhere they can
afford.

Alison
Garnham: The difficulty is that the person with the
high housing cost does not gain. The implication is that somehow they
are benefiting from having this extra money but they are not; it is
being handed to the landlord. By all means look at ways of addressing
high housing costs—no one would be against that—but it is
not the family concerned that benefits. It will, however, be the family
concerned that suffers the disadvantage if they are made to
move.

Q
191Jane
Ellison (Battersea) (Con): On this important question
about the principle, I just wondered if other panel members could be
invited to
comment.

The
Chair: Does any other member of the panel wish to
comment?

Fiona
Weir: The main thing that we would want to say is
that there has to be a slightly better way of dealing with the very
clearly perceived unfairness of the extreme cases that we regularly see
in the popular press. This feels like a very crude and artificial way
of dealing with that. Although we entirely understand why people get
upset by some of the articles that appear, they are a small number of
cases, and this does not feel like the most appropriate way of dealing
with something that people understandably do not feel is
fair.

Sarah
Jackson: From a working families perspective, please
bear in mind the complexity of what keeps a family together.
It’s very easy to say that a family should just move, but you
have to think about the child care, where it is, how people get there,
the school, the person’s job. I think, like Fiona, that we must
be careful not to be drawn into the popular press examples.

Fiona
Weir: Two key Government aims are dependent on people
not having to move house a lot. Single parents are highly dependent a
lot of the time on their mum to provide child care, so the moment you
start upsetting those informal relations you have a real problem if you
are trying to get single parents into work. Also, a lot of what the DWP
is doing is trying to strengthen family relationships. If you’re
trying to get the other parent engaged in that child’s life, the
last thing you want is to end up with the single parent moving away
from the other parent, because it gets much harder to get some
co-operative, shared parenting arrangement going between
them.

There
are huge consequences for other parts of Government policy if you take
decisions that have those unintended consequences. That is our biggest
concern. We are seeing too many unintended consequences coming out of
details in the Bill that have not been well thought
through.

Q
192Ms
Buck: I have a very quick question. To give a hypothetical
example, would it not be more economic for a couple with, say, four
children to split into two households and make two separate claims,
which could end up costing the public purse
more?

Alison
Garnham: I think there is an incentive to split up
created by this—that is
right.

Q
193John
Glen: Does anyone on the panel believe that a benefits cap
in principle is right? Nobody. Thank you.

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Q
194Anas
Sarwar (Glasgow Central) (Lab): The Bill would introduce
financial penalties for incorrect statements and failure to disclose
information. I just wanted to hear your views on that
proposal.

Alison
Garnham: We would be very concerned about that. There
is existing case law dealing with fraudulent misrepresentation, and the
current rules are that if you misrepresent or fail to disclose a
material fact, that has implications for whether any overpayment that
arises can be recovered. We think those rules are pretty satisfactory,
and it would make sense to carry them forward into the new
scheme.

Q
195Anas
Sarwar: I notice you said in a previous answer that you
used to be involved with citizens advice bureaux. I wondered what your
thoughts are on the impact of less funding going to advice agencies,
and whether that in itself could increase the number of people who make
mistakes on forms and fail to disclose information because they do not
get that
advice.

Alison
Garnham:Absolutely. We are facing a
perfect storm in the advice world at the moment. At one and the same
time, we are seeing the abolition of legal aid, which at the moment
contributes about one third of the funding of many citizens advice
bureaux, because they have legal aid franchising contracts. Another one
third of their funding is made up of funding from local authorities,
and we understand from Citizens Advice that if the cuts in local
authorities are passed on to citizens advice bureaux, that could reduce
by as much as a half the service that they currently
provide.

At
the very time when we have rising unemployment, massive changes to the
benefits system, and many reasons why people need to seek help
post-recession, there will be fewer and fewer places where people can
go for advice, including local authority welfare rights advice
services, many of which have already been closed down. We regularly
hear from people who are about to be made redundant. Services such as
Derbyshire welfare rights, Kent welfare rights, Warwickshire welfare
rights, which are all centres of excellence on advice on social
security, are disappearing. That is a real
concern.

Q
196Anas
Sarwar: You said there is a risk of losing up to half the
advice that you currently supply. Can you quantify that in terms of the
number of families that that could
affect?

Alison
Garnham: I no longer work for the citizens advice
bureaux service, so I do not have the data about how many families they
see, but it will be
significant.

Q
197Priti
Patel: To go back to the concept of civil penalties
and people providing the wrong information, there are naturally
concerns among members of the public that at the end of the day
taxpayers’ money is involved. Do you feel that such penalties
could bring some integrity to the system, and restore public confidence
so that they know that money is being targeted at people who
desperately need
it?

Alison
Garnham: The Department for Work and Pensions is
probably downplaying the success it has had. It has actually done
rather well in driving down the level of fraud in the system. Levels of
fraud are very low. It is much lower: down to about £1 billion
and much of that is error. Compare that with the situation in the tax

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system, where the level of avoidance and abuse is much higher: the
lowest estimate is about £40 billion. In terms of the security
and integrity of the system, the DWP has been doing quite a good
job.

Q
198Priti
Patel: Could this go further to enhance it? At the end of
the day, the public read a lot of stories in the press, and this is
about ensuring that in these days when there is not enough
taxpayers’ money to go around money goes to the right
people.

Alison
Garnham: For the reason I gave, I think that the
rules about misrepresentation and failure to disclose currently operate
rather well. The case law is very well understood. The rules provide a
right of appeal for claimants to ensure that whether they must repay
the money is established in a tribunal. The introduction of civil
penalties, which would possibly weigh in even without that process
taking place, is very worrying. There is an issue about due
process.

Sarah
Jackson: Could I add a point on this? Parents are
already terribly worried about the possibility of making an incorrect
claim, because child care costs fluctuate. They can fluctuate wildly
from week to week and month to month, so it is very difficult. Parents
are very worried about over-claiming and about doing something
incorrect. They will phone our helpline, and it can take an adviser
more than 40 minutes to work through with the parent what their balance
of work and child care should be and might be and how a claim for tax
credits should be presented. There is already a real disincentive to
parents built into the system. They want to get it right, and I do not
think we need to make anything harsher for
them.

Q
199Yvonne
Fovargue (Makerfield) (Lab): There is an onus on the
claimant with the civil penalties, but, in your opinion, are the
majority of mistakes made by the claimant or are as many or more
official error, which has no consequent penalty or
redress?

Alison
Garnham: That is right. The majority of overpayments
are official error rather than claimant
fraud.

Q
200Anas
Sarwar: To pick up where Yvonne left off, the majority of
errors are by the DWP rather than by claimants. Would you support a
proposal along the lines of an early-warning system giving claimants an
opportunity to reverse the mistake and reclaim something rather than
have a straight-off penalty? Have you had any representations with the
DWP on that?

Alison
Garnham: Yes. One thing that people are concerned
about is that, increasingly, Jobcentre Plus administration has moved to
remote call centres, largely for reasons of cost. One difficulty with
that is that people no longer have the face-to-face opportunity to talk
through their claim locally. It is very important that, first, we have
local advice services, and there is a problem with that at the moment
and there will be in future. Secondly, we need to have the facility for
people to discuss their case with the person dealing with it, which is
difficult when they are at a call centre and you do not know with whom
you are speaking. The Department will need to address that problem with
universal credit, because, particularly with a new system, it is
inevitable that people will not know basic things about how to

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complete their form, what they are supposed to be telling you and what
their advice notice means. It is important that basic work is done on
how people will receive advice on those
things.

Q
201Paul
Uppal (Wolverhampton South West) (Con): Sorry, Alison, we
all seem to be picking on you. To pick up on one specific point, you
mentioned that you saw a situation in which it is much more a case of
official error rather than individual claimant fraud. Is that based on
anecdotal evidence from your experience or is there hard evidence for
that?

Alison
Garnham: It is the official figures. They are more to
do with error than
fraud.

Q
202Paul
Uppal: Specifically on fraud, how would the DWP pick up on
the numbers? What would be an effective way of doing it?

Alison
Garnham: They carry out surveys. What do you mean? Do
you mean how the Department would find out who is making mistakes? They
tend to look at samples of cases to see what is happening on a case and
find out the reason for the mistake. That kind of exercise is useful,
and other than that it is about advice and support to the
claimant.

Paul
Uppal: For the sake of clarity for the whole panel and so
there is no ambiguity on this, in terms of the benefit cap, is the
general feeling that it should always be demand led in terms of
individual claimants, rather than there being a limit on benefit
claim?

Alison
Garnham: Yes, absolutely. The whole purpose of
devising a system like universal credit is that you develop an amount
that is supposed to represent the minimum needed for somebody to live
on. That is what the modelling of universal credit has been trying to
indicate—just how well will this produce a system that can
support
people?

One
of the difficulties is that when it was originally devised the Centre
for Social Justice wanted a taper rate of about 55%, which would have
been a much more generous system than the one we are looking at, which
has a taper rate of 65%. So there is an issue about how much money is
going into this. That will have a knock-on effect in that it affects
the amount of help people will receive for child care costs, and as I
have just said, that is crucial to determining whether people will be
better off in
work.

It
is also affecting things such as whether it is worth a second earner in
a couple taking a job. We know that the marginal deduction rates for
second earners will be particularly poor, which is very worrying for a
number of reasons, partly because of women’s independent
income—because of who needs to spend the money on the children,
but also because families change. For example, when someone becomes a
lone parent, if they have never worked, it is much harder at that point
to try to get into a job. You are asking the DWP to make a big effort
to get those people into work, when in fact if they had already been
working, they would have been in a position to support their family
better when they became a lone parent. So the issue of a second earner
is another question that must be taken into account, and probably could
be addressed by something like an additional disregard.

Column number: 112

These matters
reflect the fact that the overall funding of universal credit is not
quite generous enough to show the improved gains from work that it
wants to offer. We can appreciate that that is clearly the intention,
but it needs more money to be able to do that more effectively. At the
moment, when you do the calculations there are a lot of people who
still have very high marginal deduction rates, even under the new
model, so we would argue that the funding envelope needs to be looked
at
again.

The
Chair: We move on to the next question: child
maintenance.

Q
203Julie
Elliott (Sunderland Central) (Lab): I have two questions
on the child maintenance part of the Bill. First, part 6 introduces
procedural hurdles to assessing the statutory child maintenance system,
with a view to encouraging more voluntary child maintenance
arrangements. Do you welcome the new emphasis on voluntary arrangements
and
mediation?

Fiona
Weir: We are generally very supportive of a lot of
what the Department is trying to do in encouraging greater
collaboration between separating parents, and we hope to work with them
constructively as part of this consultation process to see what that
additional support might look
like.

The
problem is that people who reach voluntary arrangements tend to have
particular characteristics. They tend to be better off and to have
quite amicable relations. They are more likely to be in work and the
father is more likely to be engaged. There is a considerable number of
single parents out there who are just not able to make private
arrangements, for whatever reason. In about 30% of cases they just do
not know where the other person is—they cannot trace what is
usually him. They often have poor or difficult relations with that
partner, and sometimes that partner is refusing to pay, or has said
that he will not. In some cases they simply give up because it is too
difficult, or because they have prioritised the contact arrangements as
the more important issue to settle. In many cases, they need the
statutory service to be
there.

A
series of procedural barriers is being introduced. First, initially,
you have to go through a gateway and demonstrate that you have
considered and thought through private arrangements. We are not exactly
sure what that looks like, and at what point you have demonstrated it.
You then have to go through the additional burden of the charging
regime, which is a huge problem, and we know from a number of surveys
that it will put single parents off. It does not sound like a lot of
money to many people—£100, or £50 if you are on
benefits—but if you are a single parent in a poorer household
you spend about £43 a week on food and about £48 a week
on rent. Those are really significant costs and they are big
psychological barriers to people, especially people who have had pretty
poor service from the Child Support Agency for a number of years. So,
erecting yet another big barrier at exactly the point when we are about
to launch a new commission, when a massive amount of public money has
been invested in a new system that ought to be much better and ought to
be lower cost, and when you want to get it working effectively and
re-establish that reputation with the parents it is there to serve is
the last thing you want to do to its usage.

Column number: 113

While we would
like to support a lot more collaboration, we think that the Government
are being naively optimistic about how many separated parents really
can overcome the genuine difficulties between them and manage to
establish private arrangements. The upshot of all those barriers could
be that fewer people use the statutory service that they need, and that
means less money going to
children.

The
maintenance payments make a big difference if you are on benefits. If
you are on a low income, even a fiver a week makes a difference to
whether your kid can be in the football team or go swimming, and
£20 a week makes a very significant difference to what your children can
and cannot do. I think there is a huge inability to grasp how much
tangible difference quite small sums of money can make to
the lives of people who are on very low incomes. That has led, to some
extent, to a devaluing of the importance of those small sums of money,
not to mention the key fact that this is also about parental
responsibility.

The
Bill is riven with the language of responsibility. The whole welfare to
work debate is very much around that, yet when it comes to parental
responsibility for payment, we risk undermining what has been a
significant effort to try and improve the system that starts getting
all fathers paying. At the moment, after the years we have put into
this, the levels of child maintenance payment remain shockingly
low.

Q
204Julie
Elliott: Would Adrienne, Sarah or anybody like to comment
on that
question?

Alison
Garnham: What is at risk here is that, by deterring
lone parents from using the state scheme, it is missing the point that
there is a public interest in children being properly supported by both
their parents. We know that even small amounts of money can make a big
difference to whether families are lifted out of poverty. We
also know that having regular child maintenance—the regularity
of payment is key, not necessarily the amount—is strongly
implicated in whether a single parent is likely to be in paid work or
not.

Those
things act together to make a very important public interest for a
properly funded state child maintenance scheme. In the countries where
they do that best, they understand that there is an investment needed.
In places such as the Nordic countries, which everyone always refers
to, they have guaranteed maintenance systems where they pay child
maintenance up front to single parents, and then they recover it from
the non-resident parent. We are putting it all back to the individual
parent and saying, “You chase it. You go in for an informal
agreement”. Of course we want informal agreements to work. In
the past, when people were forced to use the CSA, that was wrong and
was not successful, so it is good that that has been retreated from.
Nevertheless, there needs to be a strong and properly funded state
system.

Adrienne
Burgess: From the Fatherhood Institute point of view,
it is incredibly important that men pay child support. We have been
very disappointed to see that the joint birth registration has been
scrapped, because that is the point at which you start to identify the
men and help them see themselves as fathers. That is very important,
particularly among these groups of fathers.

Column number: 114

What we are
very interested to see in the statistics, now that we have statistics,
is that even among teenage mothers 78% joint register the birth with
the father. Of their birth partners—almost all teenager mothers
have birth partners, of course—90% are the father of the child.
So these guys are around there right from the beginning. Whether it is
enforcement, or however it is or whatever it has to be, I understand
the desire to help people make their own arrangements. I understand the
fact that you want to make the bar higher so that those who can go for
agreed arrangements do so, and it is very important to me that the
enforcement of child support is really strong. So, putting too many
barriers in the way may have an unintended consequence. However, one
way to look at that would be to do what one has to do and then monitor
and evaluate it, so that we see what is really happening rather than
being scared about
it.

Q
205Priti
Patel: I would like to make a comment, and then ask a
question of all members of the panel. One of the saddest aspects of the
casework and constituency work of most Members of Parliament is when
broken families come to you in need of support and state
help.

On
the point about seeking voluntary agreements, it is quite obvious that
there are many system breakdowns somewhere out there—families
split up and access to payments is highly problematic in many cases. I
would welcome views from all panel members about practical steps to
encourage parting couples to come together in a grown-up, adult way to
find the right kind of voluntary agreement, as that will be in the
interests of their
child.

Alison
Garnham: You might need to go a step
earlier—to what happens when people are together. One of the
issues about child maintenance is that, if there has not been much
transferring of money from one partner to the other within the
relationship, it will not happen outside the relationship either. You
are trying to deal with something that may be a problem from the
previous relationship as
well.

Obviously,
there is more that can be done on relationship support and advice to
people about how to come to amicable arrangements. As Fiona said, we
know that there was always a group of people who reached amicable
arrangements, which were working really well and people wanted to leave
them as they were. The problem was always the ones who did not and
could not reach an agreement. Again, the legal aid situation kicks
in—legal aid for family issues is to be abolished, so there will
be even less help available for those families in reaching agreements,
particularly when one partner is
reluctant.

Q
206Priti
Patel: On that point, is this all about after the event,
or is it educational awareness much earlier on—not just when
relationships are being formed at school and so on, but financial
responsibility and personal
responsibility?

Sarah
Jackson: I would say this is a very interesting
example of where the world of work, the world of welfare and the world
of family well-being all overlap. It is a very good example of how
important it is to make sure, right from the start, that fathers have
rights to paternity leave and to parental leave, because we know that
the more engaged fathers can be in the first year of life, the longer
living the relationship is likely to be. Although this is outside the
scope of the Bill, it is very

Column number: 115

important to look at what we are going to do to support fathers with
independent rights to ensure that they can be fully engaged in family
life.

Adrienne
Burgess: I would add something that brings us back to
the Welfare Reform Bill—this old-fashioned thinking about
divided gender roles. We talk about “the main carer” and
the “other” person. We have individual taxation, and
people can live together and be individually taxed, but we have this
split—as soon as it is about benefits, we talk about “a
carer”, as though the other one does
nothing.

What
tends to happen—this is central with separation and
divorce—is that when the man goes for jobseeker’s
allowance, whether he is living with the woman or not, or living
secretly with her or not, he is seen as a single, childless man and not
as a father at all. That means that there is no way that we can work
with his fatherhood in the jobcentre. We know from lots of good
practice that if you work on men’s fatherhood at the same time
as you work on their job-readiness, and help them to build
relationships with their children and see themselves as valuable, it
has positive spin-offs in their getting and staying in employment. It
is not separate, yet the whole thing treats it as if it
is.

Going
back to the fact that the Welfare Reform Bill discourages the second
earner from earning, that is terrible because it again sets up the idea
of divided roles, as if her earnings do not matter. We know that where
both partners work, relationships are more stable. Where there is a
more gender-equal operation of earning and caring, relationships are
more
stable.

Q
207The
Parliamentary Under-Secretary of State for Work and Pensions (Maria
Miller): It is easy to paint a picture that parents,
especially fathers, do not want to take responsibility, but we know
that more than half the people using the current statutory system would
like to make their own financial arrangements, but do not think they
can at the moment. Will panel members give us one example of how we
might improve the current system so that those people who would like to
stay outside the statutory system can do
so?

Fiona
Weir: As part of the family justice review, there has
been a lot of reviewing of some of the interventions that can be very
helpful when parents separate. One thing that is clear is that, if you
can catch them early enough, some of the parenting information
programmes that are out there at the moment can make an enormous
difference, because the parents are often not thinking things through
properly from the children’s point of view. When they understand
the impact they are having on the children, it can help them to work
much harder at containing the acrimony. Making much more of that kind
of support available is
important.

Q
208Maria
Miller: Are there any other responses from other panel
members?

Adrienne
Burgess: We are looking into charting the
father’s journey––for Maria, actually. We are
researching to find out where the men go because we know they are not
getting the information and being engaged with early
enough.

The
Chair: We will have to draw things to a close as we have
run slightly over time. Thank you very much for your
evidence.

Column number: 116

2.2
pm

Q
209The
Chair: We come to our next set of witnesses: the
Women’s Budget Group, the Centre for Separated Families and
Family Action. I understand that Fran Bennett has been delayed on a
train, but I hope that she will be with us shortly. I invite the two
witnesses present to introduce themselves.

Nick
Woodall: I am Nick Woodall, from the Centre for
Separated
Families.

Sam
Royston: I am Sam Royston, policy and campaigns
officer with Family Action.

Q
210Stephen
Timms: I would like to ask about provision for support for
child care costs. We do not yet know how the Government propose child
care costs will be supported in future. What do you think the
arrangements should be? Should there be support for people who work
less than 16 hours a week, as well as those who work more than that?
How should child care payments be made and to whom? What proportion of
costs should be
covered?

Sam
Royston: I normally start answers to this question by
setting out what the system is at the moment, because it is so poorly
understood. At the moment, households can in some cases receive up to
97% of their child care costs through the benefit and tax credits
system. That is through a combination of the child care element of
working tax credit and disregards from housing benefit and council tax
benefit. It will not be possible to replicate that system within the
universal credit because of the way in which different benefits are
being brought together into one package.

From what we
understand, proposals for dealing with child care costs are either to
introduce it as a disregard, which I understand the Secretary of State
has now moved away from, or to introduce a child care element similar
to the child care element of working tax credit. If a similar amount of
money was put into the system as there is at present, it would seem
very unlikely that it would be able to cover 97% of child care costs
for an element of that sort, because of how the money would be
distributed across a wider set of households.

As a result,
from what we have heard, the Government are looking at substantially
reducing what some households—particularly the lowest-income
households, who are in receipt of housing benefit and council tax
benefit—could receive in terms of help with child care costs. We
have heard 70%, or even 60%, suggested. If a child care element of 70%
was introduced, that would leave some households paying 10 times more
towards child care costs from their own pocket. From some of the
calculations that we have done, that would leave households that could
otherwise be better off under the universal credit being substantially
worse off. That is a huge worry in terms of promoting work incentives,
particularly for lone
parents.

In
terms of who it should be paid to, we certainly agree that one of the
big benefits of the universal credit is incentives to work less than 16
hours. We would certainly support extensions to household working under
the hours threshold. We also think that there should be some additional
recognition of the additional costs of child care for disabled
children. As for how it should be paid, we agree with what the
Government now seem to be considering, which is an additional child
care element, but we think it needs to be
substantially in excess of 70%.

Column number: 117

Nick
Woodall: It is fair to say that this is not an area
in which the Centre for Separated Families has any great expertise,
except to say that when families separate, there can be quite a
disruption to the organisation of the family. Certainly for people who
may not have been in the labour market to get back into work, or for
people who may need to change their working patterns, child care costs
can be extremely important. We urge the Committee to think about the
potential for child care costs to reflect the responsibilities that
each parent has after family separation, and the potential for
supporting both parents in their child care
obligations.

Q
211Ms
Buck: On the same point about child care, the proposal is
to reduce still further the age at which lone parents will be required
to go into work, so their oldest child is five. What are your views on
the effectiveness, advantages and disadvantages of the way in which
conditionality has been introduced to date? What do you think about the
balance between sanctions and incentives and its effectiveness? What
might be the characteristics of parents of five-year-olds who might
require particular
treatment?

Sam
Royston: One thing closely related to child care
issues is that if, as appears to be the case, help with child care
costs is to be reduced, we need to be extremely careful about bringing
in additional conditionality, and extremely careful that parents are
not put in a position where they either have to lose money by moving
into work or face sanctions.

It should
always be the case that people are left with one option or another.
That is one of the concerns about the introduction of a cap on benefit
receipts. Some parents—particularly parents with large numbers
of children who require high levels of child care costs, potentially
above any cap on child care costs—will potentially be left in a
situation where, out of work, their support is limited to £500,
which could be very punitive. Alternatively, they might have to move
into work and could in some cases be no better off because they would
be paying extremely high child care costs, perhaps £500. They
would be paying very high proportions of that from their
pockets.

On
conditionality and the way that support is offered, nobody should be
put in a position where they could be worse off by moving into work.
They should not be stuck between a rock and a hard place. That is my
fundamental
concern.

Q
212Ms
Buck: What do we know about the characteristics of the
group of parents who might be losing the child care support that they
would have been getting before the proposed
reductions?

Sam
Royston: The group of parents who would be
getting—

Q
213Ms
Buck: Do we know anything about their characteristics? Do
we know that they are larger families? Do we know that they are
geographically concentrated in particular areas? I am asking about the
people who at the moment might be getting, for example, 97% of support
because of
disregards.

Sam
Royston: One of the things that I said was that the
households with the highest proportion of child care costs will
typically be the households that are least

Column number: 118

well off. Housing benefit and council tax benefit tend to be withdrawn
at a high rate, so once you are in excess of a low to moderate income
you are unlikely, except in areas of very high housing costs or if you
have a very large family, to be receiving help with housing benefit and
council tax benefit. Yes, changes in child care costs would be
particularly focused, it seems, on those households, because they are
the ones receiving the most at the
moment.

Q
214Ms
Buck: Lastly, this is a question that I asked CPAG. Do we
think that the issue of encouraging people into mini-jobs might raise
questions about child care support, in particular because child care
tends to be paid for on a sessional or daily basis? Child care
providers will perhaps require a top-up that might not be covered
within the provisions of child care
support.

Sam
Royston: That is an interesting point. One of the
things that we have discussed with the DWP is the potential to try in
some way to encourage child care providers to move towards hourly-based
provision. It is not just with mini-jobs. At the moment, if you
are encouraged—in some cases, it can be quite firm
encouragement—to take on an extra shift, the session of child
care that you have to pay for to get that might not line up at all and
could lead to your being substantially worse off, even under the
current system but perhaps particularly under universal credit. The
person in question might have, essentially, to pay for excess child
care. That system would be much better, in my view, if you could move
more towards an hourly-based system, so that child care providers were
much more flexible about how parents took up child
care.

Q
215Ms
Buck: Do you have any sense of how the sector and
providers might be able to accommodate that? They have some difficulty
with sessions as it
is.

Sam
Royston: I think that you would need to ask
them.

Q
216Margaret
Curran (Glasgow East) (Lab): Can I just expand a little
into a slightly different category? It is about your point, Sam, about
the calculation of being better off. Do you have any insight to share
with us on people’s calculations about free school meals, and on
the current proposals about that and how they would impact on
families?

Sam
Royston: Free school meals is a very interesting one.
We have been working with a number of groups that have concerns about
how free school meals could be introduced under the universal credit.
At the moment, free school meals will typically be withdrawn at the
point at which a parent moves into full-time work, which for benefit
purposes is typically 16 hours. Happily, or to an extent happily, that
coincides with the payment of additional working tax credit, so
although they lose free school meals they gain working tax credit,
which means that the benefits of moving into work are reduced but they
still would not typically be worse off by moving into work at that
level.

Under
the universal credit, because of the proposals, which we very much
welcome, to introduce a smooth transition into work during which there
is no massive increase in income—you get an gradual
increase—withdrawal of free school meals at any one income

Column number: 119

point would create a substantial cliff edge, as it is known
in the benefits world. It is called a cliff edge because that is what
it looks like on a graph. As your earnings go up your income gently
goes up, and then it shoots down because of the notional cost of the
school meals—you have to pay for school meals after that
point.

We
are very concerned that an income threshold could be introduced into
the benefit system, over which you would no longer be entitled to help
with school meals. Calculations that we have done suggest that if you
introduce that, supposing that free school meals for a three-child
family are worth about £1,000 a year—that seems a fairly
accurate estimate—it could lead to a gap of about £4,500,
and people would be worse off having that income than if they had a
lower income. If you earn £9,999 and at £10,000 you would
lose the help with school meals costs, if you have three children in
school you will be worse off until you reach about £14,500. That
is very odd.

We have
talked about the need to introduce some kind of smooth withdrawal on
free school meals. We think that one possible way of doing that is
this. A lot of schools already use cashless systems for payment of help
with school meals costs. We wonder whether, instead of providing the
full help with school meals, you could provide a tapered amount paid
into the account that the children could then use in their school to
help with the cost of their school meals. The parents could top
up the additional help they
need.

Q
217Guto
Bebb: On the specific point about free school meals, we
are aware that there is a potential for a cliff edge, but all that you
have said is conjecture at this point in time, because there is nothing
in the Bill that illustrates any of the points that you are
making.

Sam
Royston: The universal credit White Paper seems to
suggest
that—

Q
218Guto
Bebb: But there are no actual figures that indicate when
the cliff edge would
be.

Sam
Royston: No, but wherever the cliff edge is, there
will be a cliff edge. It does not matter exactly which income threshold
is used. Any income threshold will mean that people over that threshold
will lose money.

Q
219Guto
Bebb:Would you be in a situation to advise the
Committee on what sorts of procedure you would put in place to avoid
that?

Sam
Royston: That is why I was saying that I think that
there are mechanisms by which you could have a smooth withdrawal of
help with free school meals. Potentially, you could add the school
meals on to a card, which a lot of children in school already have, and
the amount of help with school meals on that card would reflect
household income. As your household income increased, the amount on the
card would be reduced, and the parent would top up that amount so that
they could pay for the school meals.

The
Chair: We will move on. Kate
Green.

Q
220Kate
Green: I am asking questions about the social fund, which
the Welfare Reform Bill proposes to abolish and replace with a system
of local authority

Column number: 120

support. Can I ask for your comments on how the current system has been
functioning and your views of what the Government propose to replace
it?

Sam
Royston: I think that the system until now has not
been without problems. In particular, we actually quite welcome the
movement towards payments on account to replace crisis loans as
alignment payments and interim benefit payments. We know that some
families can be bounced between one and the other and never be quite
sure what they are meant to be getting, although we are not quite
certain that now is the right time to make that move, because of
potential problems with the IT system for universal credit, which is as
yet untested. It would be moving that final safety net into universal
credit.

As for the
other parts that are essentially being moved to local authorities, a
certain amount of unring-fenced funding will be given to local
authorities to distribute using powers they already have, as we
understand it. We are concerned that at a time when local authority
cuts are being made, money could just be used to fill gaps in
expenditure that local authorities have already made.

I was saying
to someone the other day that if I were the chief executive of a local
authority, I would be very tempted to use unring-fenced funding to prop
up services that I knew were being cut. I would not want to make anyone
redundant and produce a new service to replace it. I am very concerned
that it could essentially mean that there is no social fund or
equivalent provision available following the localisation proposed. The
current system is imperfect, but at least there is a system. I am very
concerned about that.

The
Chair: I encourage shorter answers, if
possible.

Q
221John
Glen: On that last point, what about the counter-balancing
effect of local democratic capability? It might not be universally the
same, but it delivers the principle that elected people are accountable
for the allocation of those funds. If they see circumstances in which
the fund is not being allocated properly, surely there is local
democratic accountability to suit local needs.

Sam
Royston: That is a really good point. Were it ensured
that the money was spent for the current purposes of the social fund
within a local community, I could be with you. Transferring the money
to local authorities to provide those crucial services, those crucial
grants and loans that families need in emergencies, would give them
that flexibility. It would mean that they could spot a gap in provision
in a certain area and respond to it locally. That is not necessarily
the problem. The problem is that at a time when local authority funding
is being substantially cut, asking, saying or advising the authority to
produce a new service is unlikely to produce that new
service.

Q
222John
Glen: The point is that it is a risk; it is not an
inevitable consequence.

Sam
Royston: It is not inevitable. Nothing is inevitable,
but it is a real risk.

The
Chair: Let us welcome Fran Bennett, who was unfortunately
delayed by train problems.

Column number: 121

Fran
Bennett: I apologise. There was a
fatality.

The
Chair: Do not worry. The first question about universal
credit will be of particular interest to you, so I will ask Mr Timms if
he would like to pursue that.

Q
223Stephen
Timms: I want to ask about clause 97. It amends the Social
Security Administration Act 1992 to give the Secretary of State the
power to decide which partner should receive a payment—or any
part of that payment—in cases where benefit is awarded to a
couple jointly. Are you confident that that provision addresses the
concerns raised by you and a number of others about purse-to-wallet
redistribution of income?

Fran
Bennett: I am afraid I do not yet know what that
clause would mean in practice. As I understand it, it deals
particularly with cases in which one partner either refuses to maintain
the other and any children, or is incapable of doing so, such as in
cases of addiction. I understood that the power to direct payment was
in part to deal with that issue. There could also be cases where a
sanction is applied to one person. In cases of joint claims for
jobseeker’s allowance, as I understand it the claim can then be
paid to the other person. I am not party to the mind of the Secretary
of State, so I am not quite sure what the clause is intended to
cover.

The
particular issues that have concerned people are the money for children
and child care costs, which is currently paid to the main carer, and
the money for housing costs, which is currently paid to the tenant
under housing benefit. Mortgage costs are currently paid to the lender,
but might in future be part of universal credit. Those issues have been
of particular concern. The major issue is the fact that universal
credit subsumes so many other payments. If that is all paid to one
person, it becomes a much more significant decision than it would be
under current circumstances where different benefits are possibly paid
to different people. That is the major
issue.

Q
224Stephen
Timms: Do you think that the clause could provide a
solution to those problems? What should the solution look like in your
view?

Fran
Bennett: I am not sure that the Secretary of
State’s direction is the right way forward. I have not looked at
it in detail, but I understood that people were considering
alternatives to that kind of provision.

Nick
Woodall: We have concerns when we look at things such
as child tax credit that can currently only be paid into one household,
because that does not always reflect the levels of caring. We are
talking about the parent who has the greatest responsibility for caring
for the child—the main carer.

In some
circumstances, parents choose to work together equitably for the care
of their children, but the financial aspects of that are not reflected
in the way the system works. Parents can go to court and get a joint
residence order. They can work on a 50:50 basis, but come out of court
and find that all the tax relief and benefits are paid to one parent to
the exclusion of the other. That can upset what would otherwise be
equitable and workable collaborative parenting
arrangements.

The
Chair: Okay. We will move back to question 4, on the
benefit cap.

Column number: 122

Q
225John
Glen: The benefit cap is probably one of the most reported
aspects of the proposed legislation. The Bill introduces an overall
benefit cap for single claimants and couples. Could I ask for your
comments on the principle of introducing such a cap? If you have any
concerns, could you explain what they
are?

Sam
Royston: In terms of the underlying principle, the
benefit cap is something that I think should work, but it should work
at the moment. People should not be worse off in work than they are out
of work. It should always be the case that you promote work incentives,
and that when people move into work, they are better off. We would
totally support that
principle.

Unfortunately,
that is not what the benefit cap does. As proposed, it bases the amount
that you can get out of work on average earnings across the country for
any household size, but we know that different household sizes in
different areas of the country have differing levels of need and
therefore get different amounts of income, both in and out of work.
Fundamentally, it should be the case that within any region, within any
local area—say a broad rental market area—for an
equivalent household size, a household should not be better off out of
work than in work, but that is what the current system
does.

We
do not think that there has been nearly enough emphasis on the fact
that households in work can get benefits. If you get benefits, it can
top up your money so that it means that in work you can get as much as
the equivalent household out of work would get. The key concern is that
different household sizes in different areas of the country require
different levels of income, but the benefit cap does not appreciate
that.

Our
core concern is that the benefit cap introduces a couple penalty into
the system—a substantial couple penalty on a level that has not
previously been seen in the benefits system. Say you have two lone
parent households that are both out of work with three children each,
and each is entitled to £400 of benefit income. Out of work
separately, they would not be affected by the benefit cap. If they
moved in together and, as a result, found a cheaper property, they
might be entitled to, for instance, £700 of benefit. As a couple
with six children who moved in together, they would lose £200 a
week, whereas, living separately, they would lose none of their benefit
income.

In
addition, by living together, they are likely to save the Treasury
money because running two separate households is likely to cost more
than running one together—that is why I said £700 rather
than £800. It seems odd to introduce a couple penalty of that
size into the benefits system, which is what the benefit cap seems to
achieve.

Q
226Harriett
Baldwin (West Worcestershire) (Con): I believe that about
2 million couples described as “couples living apart” are
currently on benefits in this country. I understand that universal
credit will consider the whole family unit and create better incentives
for those 2 million couples currently living apart to live together. In
the light of what you were just saying, can you give us an idea of the
number of couples that you think would fall into the category of having
six
children?

Sam
Royston: No, that is obviously a very theoretical
question. I do not know which couples are currently living apart. I
suppose that it might be possible to do

Column number: 123

the quantitative analysis to show how many couples
were formed from two lone parent households on that basis—so how
many couples would be better off if they separated—but I do not
have the
data.

Q
227Harriett
Baldwin: Currently, 2 million couples are estimated to be
living apart, so I wonder about the number of couples that you were
describing as being affected by the benefit cap. Do you think that it
would be higher or lower than 2
million?

Sam
Royston: I do not know. The underlying mechanics is
really what I deal with, rather the overlying number of people
affected.

Q
228Harriett
Baldwin: Do you think that it could be higher than 2
million
people?

Sam
Royston: I have no
idea—sorry.

Fran
Bennett: One of the issues about the payment of
universal credit to one person in the couple is a similar concern and
may be an underlying reason for those couples living apart, because if
they are means-tested when they come together, their assets and
resources are joined together and tested in that way. Once universal
credit is brought in, if the payment is all made to one person in the
couple, the decision to move in with someone is an even bigger
one—it ups the game—because your partner may get all the
means-tested income in the household paid to them. That means losing
your economic independence, by moving in with a partner. So it appears
to us that there may be a disincentive to doing
that.

Q
229Harriett
Baldwin: With couples with children, are there any
benefits to the children if the couple live together, rather than
apart?

Fran
Bennett: Clearly, if you have a harmonious couple
relationship, that is wonderful for children, but the issue that I can
see is that it is less likely that you have a harmonious couple
relationship if one person gets all the
resources.

Sam
Royston: May I make a brief additional point that
refers back to a point that I made earlier about parents who may be
stuck either facing the benefit cap or exceedingly high child care
costs? I just do not know what a parent who would face either
£500 of child care costs or having their benefits, which might
be £700, limited to £500 would do. I have no idea what
they are meant to do. They cannot escape the benefit cap. It just does
not make sense to work in those circumstances, because there are caps
on the amount of help with child care cost that you can get. So they
are really going to be caught between a rock and hard
place.

The
Chair: I think that you have made your point on that one.
We will move on to civil
penalties.

Q
230Priti
Patel: I think that we are all very mindful that the
household circumstances of lone parents and separated families change
frequently—far too frequently than they might like. I would
therefore welcome the panel’s views on the whole concept of
financial penalties for incorrect payments and failures to disclose
information about changing
circumstances.

Fran
Bennett: There are already penalties for fraud in the
system. Those penalties are being increased, and I do not think that we
need a civil penalty in addition.

Column number: 124

Sam
Royston: I basically agree with Fran. I think that
there is far too much emphasis, unfortunately, on what the claimant
needs to do, rather than on what the Department for Work and Pensions
and Her Majesty’s Revenue and Customs need to do, certainly at
the moment. There is so much error in the system at the moment that far
more emphasis is needed on what DWP and HMRC do to make things right
when things go wrong and a bit less on what claimants need to do.
Claimants need to be mindful of their responsibilities. They need to
make sure that, to the best of their ability—remember that, in
many cases, you are dealing with very vulnerable people—they
give the right information and keep it up to date. But the Government
and the DWP and HMRC need to take a bit more responsibility, too,
because there are such high levels of error at the moment and so many
problems and so many people faced with really serious problems with
their benefit payments as a
result.

Fran
Bennett: Particularly when people are getting
together and living together in a new relationship, it is quite
difficult to know certainly when they become what would be considered
to be a couple and make a joint claim for universal credit instead of
another claim. It is particularly difficult for people when they are
establishing a new
relationship.

Q
231Priti
Patel: Obviously, the universal credit seeks to simplify
the system in a significant way. Do you think that will go some way to
reduce errors? Therefore, it will not feel as pressured as you suggest
for
individuals.

Nick
Woodall: We do not have a view on
that.

Fran
Bennett: They are still going to have to report, as I
understand it, similar changes of circumstances, as they do at the
moment. It is just that there is an integrated payment rather than
separate
ones.

Q
232Jane
Ellison: It goes without saying that we all appreciate the
difficult situation people often find when their circumstances change,
they are under stress and all that. Allowing for all of those caveats,
I am sure you would accept there are some people who perhaps are not
making the best efforts to disclose the right information. It is fair
to assume there must be some element of that. You both just said that
you do not think there should be a financial penalty. Turning that
statement around would be to say that there should be no financial
penalty for telling an
untruth.

Fran
Bennett: There are fraud
penalties.

Q
233Jane
Ellison: That is the implication of saying that you do not
think there should be a new financial penalty; saying there should be
no financial penalty.

Fran
Bennett: No, it is not. We are saying that there are
already sufficient criminal penalties and fraud provisions, and we do
not think a civil penalty is needed in addition to those current
penalties that are very draconian. That is what I am saying; I should
not speak for
Sam.

Sam
Royston: That is a very reasonable
point.

Q
234Jane
Ellison: I have a follow-up point. From your
point of view—I realise the organisations you
represent—do you ever give consideration to the wider buy-in of
the general public about how welfare works? How do you think things
such as your opposition to that clause affect people’s
confidence in the system?

Column number: 125

Sam
Royston: I certainly do. We have a very high number
of families, but we must not distinguish between benefit claimants and
the wider general public, particularly for tax
credits.

Q
235Jane
Ellison: I was
not.

Sam
Royston: We have a large number of families who know
well indeed what it means to be faced with an error in their tax credit
payment, in their benefit payment. That means paying back a very large
amount of money in some circumstances, and sometimes due to no mistake
on their part at all. Over the past seven years, a lot more people in
the general wider public have a lot more sympathy towards people who
are faced with problems in the benefit system. I hope that those
experiences will show. I expect they are coming into your constituency
surgeries, and will give a sense of the importance of ensuring that
those errors do not happen, and that the benefit system treats people
with the sympathy and respect that they
need.

The
Chair: We will move on to child
maintenance.

Q
236Sheila
Gilmore (Edinburgh East) (Lab): One of the provisions of
the Bill is to introduce new arrangements, or new hurdles, for getting
statutory child maintenance. One is about putting in an extra stage of
trying to get people to go through mediation. There is also the
question of financial hurdles if introducing charges for the applicant
parent—the parent with care—as well as perhaps the other
parent. It has been suggested that charges should be added to the
collection process. What are your feelings about that? I appreciate
that some of it is still out to
consultation.

Nick
Woodall: While the proposed changes to child
maintenance that require primary legislation are contained with the
Welfare Reform Bill, it is important that we recognise that child
maintenance is not a benefit. Child maintenance is not, as it is often
popularised, a poverty issue either. Child maintenance is essentially a
parenting issue. It is about how both parents are going to continue to
discharge their responsibility to their children after they separate.
We certainly welcome the idea that this is cross-departmental, that the
Government are beginning to see child maintenance in its wider
context.

Parents
themselves are best placed to make their own arrangements for their
family. They can reflect in any maintenance arrangements the nuances
and complexities in their family system. We believe that the
state’s role is to encourage and empower parents to be able to
make their own private arrangements. The state should get involved only
where parents cannot or will not make such arrangements.

In his 2006
report, Sir David Henshaw recognised that arrangements that parents
made for themselves lasted longer, and there was greater compliance and
flexibility further down the line. His overall vision for the changes
to child maintenance was about encouraging people to move away from
using the statutory system, which was inflexible and caused greater
division between parents, and encouraging them to make their own
arrangements.

Henshaw
saw that you needed to change the environment that caused the statutory
system to be seen as the default option for parents. When parents were
separated

Column number: 126

and there were high levels of distress and anxiety, they often initially
looked around for what they could turn to. The child maintenance
system, the statutory system—the Child Support Agency—was
seen as that default option, and in many ways, it still is. He argued
that something should put the brakes on parents, so that they reviewed
the situation and were given the support, encouragement and information
they needed to be able to make their own
arrangements.

We
think that the measure is a step further from what the previous
Government did under the 2008 Act. It asks, “How do we do this?
What can we put in place that will support parents around the wider
issues?” The issues that prevent successful child maintenance
arrangements are not always related to child maintenance; they are
related much more to emotional problems, to housing and to a range of
other factors. What can we do to support parents? We believe that the
proposals will begin to help.

The charging is a bit of a red herring. In the figures
that show the people who are affected, 16% of those who are using
the statutory system would pay no more than 35p a week, 40% would
pay no more than 70p a week—that is at the lower end of the Government’s
proposals. We need to look at the measure in its widest context.

Fran
Bennett: I cannot speak on behalf of the
Women’s Budget Group on this, because we have not included it in
our evidence. Personally, I would have concerns about charging, and I
think that a lot of lone parents who have their children resident with
them would find that rather difficult.

Q
237Sheila
Gilmore: From my experience as a family lawyer, in the
vast majority of cases people made their own arrangements. I do not
recognise the scenario that you are painting. Parents made such
arrangements with assistance through a legal agreement, which would be
binding. Certainly, in Scotland, such an agreement would be equally as
enforceable as a court order, which you could no longer get. Clearly,
however, in some situations there is a power imbalance or there has
been a difficult relationship. Is that not very difficult for
people?

Nick
Woodall: I absolutely agree. The section 6 repeal was
a huge step forward, because it stopped forcing those people who were
capable of making their own private arrangements into the statutory
system. But yes, absolutely, some relationships make it extremely
difficult —or impossible—for parents to make private
arrangements. But they are the minority.

I
guess we would say that it is about time that we stopped making
legislation based on minority experiences and looked at the wider
cohort of separated families. What is going on out there in the world?
We find that the majority of parents want to do the best things for
their children and they want to make private arrangements for them, but
they struggle to know how to do so. The proposal is that there will be
a gateway that puts the brakes on people using the statutory system,
but something will come underneath that to say, “Here’s a
range of services, some information and some things that will help you
make those private arrangements.” When we look at what is out
there already, there are some very good things, but our concern is that
there are also some things that are not so good. We need to be careful
that we do not signpost people—

Column number: 127

The
Chair: I am afraid that we have run out of time for this
session. I am sorry to cut you off mid-sentence, but we must move on.
Thank you for giving evidence to the Committee this
afternoon.

2.45
pm

The
Chair: Councillor Reed, you represent the Local Government
Association and London Councils. Could you introduce yourself briefly
to the
Committee?

Councillor
Reed: You did a good job
of it then. I am Councillor Steve Reed. I represent both the Local
Government Association and London
Councils.

The
Chair: The first question is from Stephen
Timms.

Q
238Stephen
Timms: I have two questions on the Government’s
proposals on universal credit. First, we do not yet know how housing
costs will be assessed under universal credit. How, in your view,
should they be dealt with in a centralised system but still reflect the
different rent levels across the country? Secondly, on council tax
benefit, the Government have decided to go the opposite way, with the
devolved scheme design and payment to local councils. Do local councils
welcome this instance of localism? How would councils respond if some
constraints were placed on how they would be able design their council
tax benefit schemes to prevent undermining the work-incentive gains of
universal
credit?

Councillor
Reed: The key point is
that the current proposals do not take account of the different levels
of cost that people experience in different areas. There needs to be
some element of area cost adjustment. I will give you some examples
from London. The cost of child care is 40% more expensive in London and
the south-east of England than it is in the rest of the country. Public
transport costs are £10 a week more in London than elsewhere.
The cost of moving into work from unemployment is £150 a month
more than for the rest of the country, and accommodation costs
are 51%
higher.

If
there is no area cost adjustment element in the proposals, the effect
of the benefit caps, particularly on housing, will be that people who
are in low-paid work, or who are unemployed but seeking to move into
work, will be forced to move out of areas where there are social
networks that help to support them and, perhaps more importantly, where
there are more job opportunities. People will be pushed into areas
where they are less likely to get work. That could have the unintended
consequences of increasing the cost to local authorities of
homelessness and keeping people who could have moved into work out of
work. It is very important that area cost adjustments are included in
the Bill if it is going to have the effect that we all want to see,
which is ensuring that anyone is always better off in work than on
benefits. I think there is a perverse and unintended disincentive in
the proposal. Sorry, what is your other
question?

Q
239Stephen
Timms: It was on council tax benefit. Do local authorities
welcome the fact that the Government are devolving the design and
payment of council tax benefit to separate local authorities? How would
councils feel if some constraints were imposed—for example, on
taper rates—in order not to undermine the work-incentive
benefits that universal credit is intended to provide?

Column number: 128

Councillor
Reed: We are quite keen
that council tax benefit should not be included as part of the
universal credit, because it would make it more difficult for councils
to collect at a time when collection rates have been going up for the
past few years. That would be made more difficult if the system were
made part of the universal
credit.

We
think that there is a role for local authorities to play in making the
whole system work, and that by localising collection for the whole
system, you can take advantage of the greater proximity that local
authorities have to people who are on benefits, and our ability to
understand the multiple and complex issues that particular families may
be facing as they try to move back into work—things such as
alcohol or substance misuse, and chaotic families. Local authorities
already have a lot of insight into that, so we would like to see the
system designed in a way that takes account of our ability to build on
the kind of expertise that we already have. That fits in with the
Government’s localism agenda, as
well.

The
Chair: We move on to the next
section.

Q
240Jane
Ellison: At the moment, size criteria for housing applies
to housing benefit recipients in the private rental sector, and the
Bill makes provision to apply the same criteria to the social housing
sector. We are interested to hear your views on the proposal in
general, and also what your feeling is for the likely impact of that on
mobility within the social housing
sector.

Councillor
Reed: By size criteria,
do you mean capping the
benefit?

Q
241Jane
Ellison: No, I mean rooms, under-occupation and so
on.

Councillor
Reed: If you mean
mobility between larger and smaller properties, I think that incentives
of that kind make perfect sense. The problem we have at the moment is
that there is a limited amount of social housing at a time when there
is growing demand for it, and the reduction in the capital funding that
we receive to build additional social housing will make that tighter.
The fact that the housing market is still not moving means that we are
getting more demands from people for accommodation in private rented
and social housing, so we would welcome ideas and proposals that would
encourage people to move from properties that are larger than they need
to properties that better meet their family’s needs, so that
families who are in cramped and overcrowded conditions could move into
better-sized
properties.

Q
242Jane
Ellison: May I follow up on that? Do you have any sense in
your authority, for example, or other London authorities that you are
aware of, of how much of the housing needs list might be met if
under-occupation were addressed? I have some sense about that for my
local authority. I wondered whether you had looked at it in your
authority or other
authorities.

Councillor
Reed: I do not have any
figures here, but I am sure that we could send you some. I know that in
London alone the housing waiting list is some 500,000, and I imagine
that even what you are talking about would deal with only the margins
of a problem on that scale.

Column number: 129

The
waiting list is probably somewhat smaller than that, because some
people will be on the list for different reasons or may have found
alternative accommodation, but we know that it is extremely large. It
is disproportionate compared with the amount of housing that is
available, and it is growing because of pressures in the economy that
mean that people are unable to buy their own property. We know that
there is pressure for more affordable housing because rents in the
private rented sector have been going up because of the impact of
demand and supply, and because of the freeze in the housing market.
That is a huge issue that we need to tackle. This proposal would deal
with it only at the margins. The real solution is to find more ways to
make affordable housing available and get people off the waiting
list.

Q
243Maria
Miller: I welcome your support for this measure. Do you
have any ideas about whether disabled people who may have had
adaptations made to their houses are a significant issue
that we need to cope with in terms of their ability to move from
property to property? Can you give us any feelings that you might have
on
that?

Councillor
Reed: I suppose that you
would look at that in terms of the cost of making a further adaptation
to the new property that they might move
into.

Q
244Maria
Miller: Is it a sizeable
problem?

Councillor
Reed: I am not aware of
that being a particularly huge issue. On disability, we are worried
that, as part of the reforms to disability living allowance and the
replacement of that with the personal independence payment, there is a
proposal to cut the total budget by some 20%. We are worried that that
could create a significant impact on our social care budgets in local
authorities.

Q
245Maria
Miller: I am sorry. Just to be clear, I am really focusing
on the housing stock that you
have.

Councillor
Reed: I do not think that
that is a huge problem, but it is part of the
mix.

Q
246Sheila
Gilmore: The proposal in the Bill about under-occupation
in the social rented sector is to reduce the amount of benefit paid to
people, regardless of whether they have moved or whether there is
somewhere for them to move to. Do you think that that is a good way of
trying to reshuffle the pack? As a councillor, my experience was that
people often wanted to move, but the smaller house was not where they
wanted to live or it was a high-rise flat that they did not want to
move to. This is a specific proposal to reduce
benefits.

Councillor
Reed: If I am absolutely
honest, it would depend on the circumstances of the individual. If you
have an older person, who is living in a property near to their family
and near to their social networks and those networks are providing a
great deal of support, I do not think that it makes much sense to move
that person to a place where they have less of that kind of support
and, therefore, their demands on public services may increase. You
would make that individual’s life more difficult, and you could
increase the cost to the public purse at the same time, so you are
achieving neither of the outcomes that you would want to
achieve.

Column number: 130

In
circumstances where it is relatively easy to move a family or tenants
from a larger property to a smaller one in the same area and of the
same quality, and they are willing to go, then there would be
absolutely no reason not to do that. You would have to take the
individual circumstances into account before doing that, because you do
not want to end up with a situation that costs more and creates more
problems.

Q
247Ms
Buck: On that same point, the reduction in housing benefit
will, according to the Government’s impact assessment, impact on
670,000 households in two years’ time. Will local authorities
have the capacity to downsize 750,000 households into appropriately
sized accommodation in their localities by
then?

Councillor
Reed: No. We do not have
properties available in those
numbers.

The
Chair: We will move on to the next issue, which is the
setting of local housing allowance
rates.

Q
248George
Hollingbery: Clause 68 amends section 130A of
the Social Security Contributions and Benefits Act 1992, and gives the
Secretary of State the power to set LHAs at his or her discretion. It
has been estimated that, by 2013-14, that would be done in line with
the consumer prices index. Do you have any thoughts on
that?

Councillor
Reed: I am sorry, on
what?

George
Hollingbery: On the Secretary of State’s taking
powers away from rent officers to set local rents and instead setting a
global rise in rents in line with
CPI.

Councillor
Reed: That does not allow
us to adapt the way that the model will suit local circumstances. If
you have an area where there is more work available—and in such
areas the cost of renting property tends to be higher—the effect
of capping the benefit that you are going to give people, so that they
can no longer live in the areas where jobs are available, is likely to
mean that they are less likely to get into work. They will be forced to
move to areas further away from the work, and the additional transport
costs—particularly if you move to outer London from inner
London, or to outside London from inside London—would become a
disincentive for those individuals to take work, even though the
housing costs would be lower. There needs to be local flexibility in
those levels to reflect the actual costs experienced in that
area.

Q
249George
Hollingbery: Do you have any idea—in Lambeth, for
example—how much the LHA is by proxy, if you see what I am
saying? What proportion of privately rented properties in your borough
comes under that funding
stream?

Councillor
Reed: I do not know the
number.

Q
250George
Hollingbery: I just wondered whether you have any feel at
all of how much downward pressure it might put on rents. That is a
totally theoretical
question.

Councillor
Reed: There is not much evidence. From
some work that London Councils did, there is not much evidence that
there is any downward pressure on rents

Column number: 131

from doing that. The pressure that you will get is
from private landlords withdrawing from accepting tenants who are on
housing benefits, because they cannot meet the market rent by doing it
that way. High rents in that part of the market are not caused by the
level of LHA that is being paid: it is caused by the housing market
freezing up because of the recession, which has caused more demand for
rented property than there is available, which has caused the rents to
go up. The only thing you will achieve by pursuing that will be to push
people who are looking for work away from areas where work is
available.

Q
251George
Hollingbery: I wonder how you can know that. Given that
you do not know the level of LHA rental in your borough, what evidence
can you present for
that?

Councillor
Reed: London Councils conducted some
research, which we could send to you. It surveyed landlords to see how
many of them would lower their rents if that was done. The majority of
them would not lower rents; they would simply stop taking tenants on
housing benefit. We could send you that
information.

Q
252George
Hollingbery: Do you take my point that it is difficult to
be absolutely quantitative about it without knowing the level of LHA
spend in your
area?

Councillor
Reed: Yes. I am sorry that I cannot
give you the figure on LHA, but I have some stats here. Research by
London Councils quoted in Parliament on 13 October found that 60% of
landlords renting to tenants in receipt of housing benefits would not
be prepared to reduce their rent if the tenant could no longer afford
to pay the existing rate because of the reduction in LHA. More than 90%
of landlords said that they would try to evict a tenant or refuse to
renew the contract if the tenant fell into
arrears.

Q
253George
Hollingbery: Indeed I might have said exactly the same
thing when I was a private landlord, but I would have wanted to look at
the market conditions. If you have any data on that, I would be very
glad to receive
it.

Councillor
Reed: Sure. We can send you what we
have.

Q
254Paul
Uppal: I am going to change the question I was going to
ask you, Councillor Reed. I worked in the property business for about
20 years and I have a great deal of experience of private landlords.
Sitting across a desk from landlords—just as you are sitting in
front of me now—I have witnessed conversations between tenants
and landlords that went along the lines of, “Well, what sort of
rent are you looking for? What can we do in terms of what the local
housing allowance is?” That conversation was relayed to me more
than once. The vast majority of managing agents that I came across
would say that it was common practice. In view of the 60% figure you
have just quoted, it would be very interesting to hear your views on
that.

Councillor
Reed: Anecdotal evidence such as that
is interesting, although it does not necessarily reflect the full
picture. The dynamic here is simply the laws of supply and demand. At
the moment, because of the freeze in the housing sales market, an awful
lot more people are renting, particularly in areas with high

Column number: 132

employment. It is the fact that there is an oversupply of demand
combined with a limited supply of properties that is pushing up the
rents. Any rational landlord is going to go where they can get the best
rental income. If LHA means that rental income from housing benefit
claimants is capped, but rental income from alternative potential
tenants is not and there is sufficient demand from such tenants, the
rational landlord is going to take the higher rent. That squeezes
housing benefit claimants out of the system and therefore out of areas
where there is greater access to employment, thus pushing more cost
onto the public purse than you might save by implementing the
cap.

Q
255Paul
Uppal: I have a quick follow up to that. It is essentially
anecdotal, but it was almost an open secret. It happened across the
country, too—I know you have spoken about localities. If it was
a perfect market and it followed that, I would completely buy into what
you are saying, but I am incredibly dubious about
it.

Councillor
Reed: Laws of supply and demand seem
fairly well established as a means of creating market rents in a
particular area. It is your judgment whether you think that that
anecdote gives you the full story, or if it is the evidence that we
have collected by talking to landlords, as well as the evidence you can
see in areas where there is high demand and limited supply of who is
moving into those properties, and what would happen if landlords were
being asked to take lower rents. Any rational individual owning a
property will not take someone who can only pay a percentage of the
market rate, when it is easy for them to get the market
rate.

The
Chair:Okay. We will move on to the next section
now.

Q
256Jenny
Willott (Cardiff Central) (LD): I have a couple of
questions about the benefit cap, which has had quite a lot of
publicity. What do you think or what evidence have you seen about the
impact of the overall benefit cap on housing benefit?

Councillor
Reed: Did you say the impact of the
benefit cap on housing benefit?

Q
257Jenny
Willott:Yes, because all benefits will be included
within the cap, including housing benefit, so there is a
question about the amount that will be available for tenants.

Councillor
Reed: Okay. There are a number of
impacts that could be had by capping benefits in the way that the Bill
proposes. One is that we are worried that it will increase
homelessness, as families are no longer able to be housed in the areas
where they currently live, and there is a statutory requirement on
local authorities to rehouse homeless families. To make a saving in one
area, you could simply be creating a greater cost in another, in an
area where the local authority has no discretion whatsoever. That does
not seem to make enormous sense to me.

Q
258Jenny
Willott: Have you looked at how much that is likely to
cost?

Councillor
Reed: Using the March 2011 rent service
data, families with two children who are looking for property in the
private sector with two bedrooms in

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central London and inner London will have to significantly supplement
their rent support from the basic amounts that they are currently
entitled to for personal support by up to £38 a week. The point
is that the proposed total benefit caps do not take into account the
higher accommodation costs in London. Beyond the cost on homelessness,
if people who need work are being pushed away from areas where work is
available, they are being kept on benefits rather than being allowed to
use the established route out of poverty, which is to get themselves
back into work again, so you are achieving the opposite of what the
Bill sets out to do.

It is also
perhaps worth reflecting that at the same time as they are making these
changes, the Government are reducing the amount of investment in new
social housing, so there is growing demand but shrinking supply. One
effect of that is increasing ghettoisation in the social housing that
we have got, where people who are poor in income terms are locked into
communities that are harder to get out of, which generates a range of
social problems. It does not make any sense to push unemployed people
away from areas where there are greater opportunities to get back into
work and away from the social networks that support them. I know that a
number of local authorities in outer London are very concerned, for
example, about their difficulties in planning pupil place numbers if
large numbers of families are displaced from inner London boroughs to
outer London boroughs, where the funding is not available for those
pupil places.

Q
259Jenny
Willott: Have you done any research into the impact of the
cap on housing markets locally?

Councillor
Reed: No. That is being conducted at
the moment, so we can send it to you when it is
available.

The
Chair: We had better move on. We still have quite a few
questions to get through.

Q
260Guto
Bebb: As you are aware, the Bill proposes to abolish the
social fund, with some elements being devolved to local authorities. I
have been quite surprised by the evidence that we received this morning
and this afternoon and the lack of confidence shown by many in the
ability of local government to deliver aspects of the social fund. Do
you share that lack of confidence, or are you of the view that local
authorities could play a part in delivering those services?

Councillor
Reed: I will read you what elements I
have in my brief, if that is helpful.

The
Government have said that the localisation of the social fund would be
fully funded. The localisation needs to cover all the costs, including
administration cost of £19 million for community care grants
alone in 2008-09. The Government have also said that local government
can provide assistance flexibly according to local need. That
flexibility would be welcome, but the localisation passes on a
significant financial risk on case load at a time of turbulence and
reform in the benefits system and a trend of rising demand. We would be
looking for decisions to be based on customer experience and where
people would naturally go for help. We think that there is a role for
local authorities, because of our

Column number: 134

greater interaction with families and individuals in providing
face-to-face support, to be able to take on aspects of this work that
we think would make it more effective.

Q
261Guto
Bebb: To press you specifically on that issue, a comment
was made about a postcode lottery being part of this, but I would argue
that the point you have just made about the ability to respond to local
needs is a strong point in terms of what the Bill is
proposing.

Councillor
Reed: The Bill seems to envisage that
people will primarily access that kind of support via the internet or
by telephone, but we think that up to a third of people will want to
access it face to face and there is not sufficient provision for that.
Since local authorities already have systems in place to deal with
people face to face and are already aware of a number of the other
problems that those families may be presenting with, we are better
placed to deal with it than alternative models might be. That would
then allow us to provide the greater local flexibility that you are
talking
about.

The
Chair: We are fast running out of time, so we have to move
on quickly to the next
section.

Q
262Kate
Green: Also on the social fund, what if local authority
decisions are challenged by individuals? How confident are you that you
have robust and transparent decision-making processes to decide who
gets a crisis loan for a cooker and who does
not?

Councillor
Reed: The system is quite confusing at
the moment, because part of the role is carried out by local
authorities and part of it by the DWP. It would be simplified if it was
all carried out by local authorities. For that to happen, we need
access to more of the DWP data so that we can see its data on which
customers are receiving or and which are not. That would make the
decisions we are taking more robust, but would also allow us to map
trends to ensure that appropriate levels of support were available
where they were needed.

Q
263Kate
Green: And to your knowledge, does the DWP intend to share
that information with
you?

Councillor
Reed: We are working with the DWP to
ensure that that is what is achieved.

Q
264Stephen
Timms: On that point, for council tax benefit presumably
you will need to access the income information about applicants as
well. Are you talking to the DWP about getting the real-time PAYE
information?

Councillor
Reed: We are in conversation with the
DWP about all of this; we do not have resolution at the moment, but
that would obviously be part of that as well. I think the point is to
simplify the system. It makes sense for local authorities, which have
access to more of the other data about those individuals and the
problems they may be presenting with, to carry out that role rather
than the DWP, but that would involve a different relationship with
Jobcentre Plus in the locality, or even local authorities taking on
some of that function.

The
Chair: We are really up against the clock
now.

Q
265Margaret
Curran: May I just clarify that you are referring to
England specifically, and you do not have any responsibility for
Scotland, Wales or Northern

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Ireland? There are huge implications for local
government in those countries and I think that that needs to be brought
to the attention of the
Committee.

Councillor
Reed: I have checked and we do not,
no.

Margaret
Curran: That is what I thought.

Councillor
Reed: I ought to have known
that.

Margaret
Curran: That is quite alright. It is more of a problem for
us than it is for you. I will not blame you for that.

Councillor
Reed: Certainly not Scotland,
anyway.

Q
266Margaret
Curran: May I just ask whether you are looking at the
distribution formulae you have for the fund. Are they being
reviewed?

Councillor
Reed: We are at a point where the whole
system is facing reform; we are looking at the whole model, how it
works and how it can work more effectively to get better value out of
what is spent, to ensure that the resources are targeted most on those
who need the support. The purpose of the review is to achieve exactly
that,
yes.

Margaret
Curran: So yes, it could well be
reviewed.

The
Chair: Order. I am afraid that is the end of our time for
this session. Thank you very much, Councillor Reed, for your evidence
to the Committee this
afternoon.

3.15
pm

Q
267The
Chair: The next set of witnesses represent Shelter, the
National Housing Federation, the National Landlords Association and
Crisis. Welcome, gentlemen, would you like to introduce yourselves,
right to left, starting with Mr
Harding?

Roger
Harding: I am Roger Harding, head of policy research
and public affairs at
Shelter.

David
Salusbury: I am David Salusbury, chairman, National
Landlords
Association.

David
Orr: I am David Orr, chief executive of the National
Housing
Federation.

Duncan
Shrubsole: And I am Duncan Shrubsole, director of
policy and external affairs for
Crisis.

The
Chair: Thank
you.

Q
268Harriett
Baldwin: Clause 11 of the Bill provides for an amount to
be included in the universal credit in relation to housing costs. Those
costs may take the form of rent payments, mortgage costs or other
housing-related costs. What are your recommendations for how housing
benefit can best be integrated into the universal credit to ensure that
it reflects housing costs in the private and the social rented
sector?

Roger
Harding: First, I should like to make a point about
clause 11 that we are universally concerned about, which is that it is
quite a blank piece of paper in terms of what it will stipulate for
that housing element of the Bill. In effect, it removes the 1992 pieces
of legislation that set down what housing benefit is and certain
principles that should underlie it. That is quite concerning because,
in effect, it gives the Secretary of State quite a lot of power to
reform housing benefit in the future.

Column number: 136

Q
269Harriett
Baldwin: We are therefore asking you for your
recommendations on what you would like to see in
it.

Roger
Harding: Sure. The first one is, simply, that those
principles are relaid in the Bill, so that for future changes we have
to come back to a Committee such as this, rather than it just go
through secondary
legislation.

The
primary provision I would like to see in there is a link between the
payments made for housing and local housing costs, especially for the
private rented sector but also for the social sector. Currently in the
social sector, it covers the amount of rent owed on a social property;
we think that should be maintained. In the private sector, there should
be a link to the local market for private rents, which will be removed
by the link to CPI, which is quite worrying in terms of the number of
areas that will become unaffordable in the future due to that
change.

Duncan
Shrubsole: To add to that, there has long been
accepted, from Beveridge onwards, that in the benefits systems on the
housing side we needed a housing payment that was related to the cost
of housing, not just nationally but in different localities. We are
concerned that any move away from linking to rent in a locality, such
as we currently have through the broad rental market areas and the rent
officer determinations, would lead to a divergence that very quickly
would mean that there were areas of the country that you would not be
able to rent in; and in other areas a gradual divergence between the
housing costs payment for universal credit and the rental areas. It has
taken us a long time to get the link back between pensions and buying
power. We would have a long-term divergence between housing benefit and
housing costs at our
peril.

David
Orr: May I say something specifically about social
housing? The point about social housing is that it exists because of
market failure. It does not exist as a market. One thing that we have
discussed, and probably will discuss further, is the extent to which,
because of the undersupply, we need to think creatively about how we
use social housing effectively. As a response to market failure,
Government invest in the provision of social housing and in consequence
they set the rent. It seems to us that it makes sense to say that if
Government have already set the rent, the system by which people are
supported to pay that rent should cover that rent. It should not be a
housing cost, it should be, “If you’re in a social home
and the rent is X, the housing support is
X.”

Q
270Harriett
Baldwin: Does anyone else want to come in on that one? Is
your recommendation on how housing costs should be calculated under
universal credit that we should not make any changes at all to how
housing costs are
calculated?

Roger
Harding: Indeed. That would be Shelter’s
position, particularly in relation to the private rented sector, where
calculations are based on local rents at the moment, and I think that
that should continue. Any welfare safety net should enable you to live,
roughly speaking, in the area you currently live, such that you can get
back on your feet, maintain your children in school and maintain family
and support links, and, therefore, increase your chances of getting
back into work, because you are aware of the employment situation in
your area.

Column number: 137

Q
271George
Hollingbery: We were pursuing a similar line with our
previous witness. I am very interested in private sector rentals and
would be much more comfortable with what you are saying if we were
presented with empirical evidence—negative evidence—that
Government subsidy has no effect on the private rental market. I want
to be absolutely certain that we can demonstrate that what Government
pay in LHA does not influence the march forward in private rental
rates.

Roger
Harding: May I add to that? The DWP conducted a
two-year review of LHA that conclusively said that that link was not
happening and LHA was not driving up rents. Further evidence to that is
that about 50% of claimants make up the shortfall between what they get
in benefit and what they have to pay out. I would almost spin the
question around and say that I would like to see evidence and proof
from the Government that LHA rates are driving up rents, because we
have not seen evidence to that
effect.

It
might be the case in some market areas that if you reduce the LHA rate,
you will see some downward pressure on rents, but that would tend to be
in areas where there is already a very high proportion of claimants. In
some areas, such as Blackpool, 80% of private tenants are claimants, so
if 80% of claimants had their benefits reduced, you would expect
downward pressure. In areas such as London, where claimants typically
make up around 20% of tenants and there is a lot of competing demand
from students, young professionals, migrants and others, you would
expect a reduction to have a very minimal effect on rents and would
expect them to rise as they have been rising for the past 20 years or
more.

David
Salusbury: We can provide no empirical evidence on
that, so anything I say would tend into the realm of assertion, which I
do not think would help.

David
Orr: I agree with the proposition that the
responsibility to demonstrate the need for change belongs with those
who are proposing the change. It is difficult to prove the negative and
it is also extremely difficult to prove that LHA has had that impact on
rents.

If
I may, I want to return briefly to Harriett Baldwin’s question
about clause 11. We have suggested an amendment to it, which provides
some details of the precise change that we would like to see.
Specifically, in relation to rents chargeable in respect of properties
let by local authorities and by private registered providers of social
housing, the appropriate amount should be 100% of the rent and eligible
service charge. We have other proposals. Our key issue with clause 11
is that it is far too widely draw at the moment. There are no reference
points in it other than that this will be determined by regulation. We
think that that does not give enough opportunity for scrutiny, either
now or in future.

Duncan
Shrubsole: I have two points to add to that. One is
that, as Roger said, a large number of tenants already face a shortfall
between the benefit they receive and their housing costs. We need to
understand that the Bill has arisen largely because of market
conditions, rather than because of the LHA itself. We are already
seeing one level of LHA cuts going through, which is the move from the
50th to the 30th percentile. In a way, that gives you an opportunity to
test the Government’s hypothesis, or an alternative hypothesis.
The point is that the Bill does not give an ongoing framework through
which you would be able to review the level at which

Column number: 138

benefits are set or to tie them to housing costs. This is one shot at
trying to remove the current framework, without any assurances on what
an alternative framework would be or, over the long term, how there
will be a relationship between the housing costs that people face, as a
reflection of the housing market, and what they will receive in
benefit.

Q
272Harriett
Baldwin: May I move on to how the Government should
support those who need help with mortgage payments? Do you have any
recommendations on that
issue?

Roger
Harding: From us, specifically on that, we would
ideally like to see the Government paying the benefit rate at the
interest rate that people are paying. At the moment, the Government
have said that they do not have the computer systems to process that.
If the universal credit will move to a more real-time processing and
data collection system, I see no reason why we cannot move to a system
whereby people, who get into mortgage difficulties and are able to
claim, have their interest payments covered in full, rather than the
current situation where a standard rate is set, which, for some, is
more than their interest rate and which, for many, is less than their
interest rate. I welcome the move in yesterday’s Budget that
extended the increased capital limit for support for mortgage interest
payments and the reduced waiting time. I would like to see that
continue and put in the
Bill.

Q
273Harriett
Baldwin: Does anyone else have a different view? My final
question is on the arrangements for housing benefit to be paid. Do you
want to express a view on the ongoing debate on whether it is better to
pay it to the tenant or to the landlord, or to have some formal
arrangement on when that may need to
change?

Duncan
Shrubsole: We have always been clear that the best
thing is to empower the tenant by giving them choice over how that
benefit is paid. Under the old system, a proportion of tenants had it
paid to them, and they then paid it to the landlord. Efforts could have
been made to greater encourage that. There were big issues around bank
accounts and people having the right mechanisms, but by switching it so
that everything was paid to the tenant, it ended up giving everyone a
bad name when individuals got into difficulty. Those who could manage
their money now face difficulties, and those who were clear that it
would be better if it was paid directly to the landlord now face
difficulties.

We currently
have two things going on: one is the eight-week rule, which means that
if you get into arrears, they can be paid to your landlord. We think
that that should be looked at. Secondly, a measure was introduced
whereby some payments could be made direct to the landlord if they
looked at their rental level. That was introduced just before
Christmas. We think that that should be continued and extended. The
benefit, particularly for vulnerable people, is that their housing
costs are the largest element of their budget. If they take the view
that, to be able to stay in their accommodation, just like you or I
might have direct debits, payment would go directly to the private
landlord so that he continued to let to them, that is surely something
that we should facilitate. The current vulnerability test has improved,
but it is still inconsistent in how it is applied across councils to
allow that to happen.

Column number: 139

David
Salusbury: If I may go on from that, it is definitely
something that our members continually raise as an issue for them. Of
course, we were disappointed when the right for the tenant to opt for
the direct payment of rent to the landlord was withdrawn. We are
disappointed that the incoming Administration have not honoured their
undertaking to restore that right to the tenant. We welcome the
announcement that, in certain circumstances, the rent will be paid
direct to the landlord, which Duncan has just mentioned.

This is not
simply a matter of sectional interest on the part of the landlord. The
landlord would prefer that to be the case, but there are two other
issues that I would invite the Committee to consider in that context:
one is the vulnerability of the tenant. Many of those in receipt of
benefits are, by definition, vulnerable. Many of them have difficulty
in managing their finances. The knowledge that the rent will be paid
and that they are secure with a roof over their heads is of
considerable importance to some, if not many.

The other
aspect is that as the demand for affordable accommodation in the
private rented sector increases—the signs are that it will
increase, and it has increased markedly in recent years—private
landlords need to expand their portfolios, particularly the reputable
ones who deal with rented accommodation as their main activity in life.
Of course, not all the 1.2 million people in the country who could be
described as landlords fall into that category, although several
hundred thousand do. When they consider expanding their portfolio, they
put together a business plan and go to a lender. To be able to say,
“Of course, the rent is now being paid direct to me”
where the tenant agrees—it is the tenant’s
decision—could, we think, be helpful in persuading a lender to
help a landlord expand their portfolio. We think that it would also
ease the absorption of these changes that are about to hit the
sector.

Q
274Harriett
Baldwin: Does your association have any evidence that it
is better value for the taxpayer to pay the rent directly to the
landlord?

David
Salusbury: We are closer to being able to provide
empirical evidence on that than on your previous question, because it
is linked with the question of rent arrears. An increasing number of
members tell us that they are experiencing arrears. In all instances
where public money is involved in those arrears, it is, of course, a
taxpayer issue, because the landlord not receiving the rent, to meet
costs, can find themselves in the difficult situation of having to do
something about it in the form of applying to the courts for
possession. That is a cost that falls to the landlord, but there is a
taxpayer funding dimension as well.

Q
275Harriett
Baldwin:But are the rents measurably lower for the
taxpayer?

David
Salusbury: Than where?

Harriett
Baldwin:Is the landlord prepared to offer lower
rent for the taxpayer in a situation where the rent is paid direct to
the landlord than in a case where the rent is paid via the
tenant?

David
Salusbury: I think that I see where you are coming
from.

Column number: 140

Harriett
Baldwin:Have you got any statistical evidence on
that?

David
Salusbury: No, not historical evidence, but our
members tell us that they are more likely to wish to maintain the
status quo of the tenancy where the landlord-tenant relationship, in
their view, is satisfactory, as it is in the overwhelming majority of
tenancies in the UK. We tend to dwell a little bit on the headlines,
but the overwhelming majority of tenancies are conducted entirely to
the satisfaction of both parties. The landlord in that situation is
more likely to absorb the reductions in LHA that are very much in the
pipeline given the knowledge that the tenancy will continue to function
satisfactorily. Not all landlords are going to be rushing forth with
possession orders. In fact, a minority will do so. We think that about
one third might consider it when the rent is reduced, but when they are
faced with the practical realities, it remains to be seen how many
actually will.

Roger
Harding: There would hopefully be an administration
saving as well. At the moment, councils have to agree their policies
for assessing who is vulnerable and then assess people according to
whether they are vulnerable. If you change it over and give the tenant
the choice, you would hope that the administration would be simpler. As
David said, if this is something that landlords are after, you would
hope that more landlords would come into the housing benefit market,
which would have a downward pressure on rents. It is worth stating that
this is a clear area where there is absolute agreement between the
homelessness charities and the private landlord
organisations.

David
Orr: There has been some concern that payment direct
is in some way equated to a failure on the part of the tenant. I really
want to challenge that assumption. It is an entirely rational decision
for tenants to make. Working with an extremely low income,
administratively and pragmatically, it makes sense for that money to be
paid direct. Now, you can do that only if you opt to do it. It is not
an obligation. It is something that tenants have to choose. The big
majority of tenants so choose. Talking to tenant board members of
housing associations, they consistently say to me, “You need to
do everything you can to persuade Parliament that we need to retain a
mechanism for payment direct.”

Separately,
in the context of the universal credit, I accept that the
administrative arrangements will be different and potentially more
difficult. I understand that the Department is exploring ways in which
this might be done through bank accounts and direct debits. There are a
number of difficulties attached to that, not least the very real
concern among tenants, possibly on a household income of £100 a
week, that a failure to meet a direct debit payment might land them
with a £35 charge. That is an entirely rational fear
on their part. But we have offered to work with officials in the
Department to explore all possible ways of creating an effective
mechanism within the context of universal credit. I know that that
offer has been well received by Ministers, but if this Committee could
assist us to get civil servants to engage in that discussion with us
now, we would be very
grateful.

David
Salusbury: May I add a postscript to that? We are
well aware of the difficulties of direct payment in relation to
universal credit. This was explained to us in some detail by none other
than Lord Freud fairly recently. Dealing with the here and now, if some
way

Column number: 141

could be found to do this, even temporarily, on the understanding that
it will be reviewed as universal credit is rolled out—because of
the administrative difficulties—we believe it would go a long
way to easing the introduction of these changes that are about to hit
us.

Q
276George
Hollingbery: To develop Mr Salusbury’s point very
briefly, we are talking about the certainty of income for landlords to
be able to borrow and buy more apartments. What about the same
situation in social housing where there are huge assets out there that
could be leveraged to borrow and build more social housing? Direct
payments would facilitate an equitisation in the marketplace, perhaps
to pension funds and others, so we could raise money on the markets
against what we already had to build more social
housing.

David
Orr: This is my territory. I think members of the
Committee will be aware that, as a result of the comprehensive spending
review, there is now much less capital investment in the work that
housing associations do. The new structure depends on a higher degree
of revenue subsidy, effectively through the benefit system and higher
rents leading to a greater borrowing capacity. There is capacity in our
sector to be able to borrow more, although perhaps not as much capacity
as people think. There are covenants that are wrapped up in some of the
lending agreements about average debt per house and gearing covenants,
which kick in quite quickly in some cases. But we are very keen to
explore—indeed, our members are putting together detailed bids
at present about how they can use the greater flexibility to charge
higher rents in some circumstances to generate additional revenue to
support further borrowing. It is absolutely essential that the
structure now, particularly in the context of the universal credit,
continues to support the certainty of the income stream, because if
lenders are not confident about the certainty of the income stream,
they will either not lend or they will price their lending at a much
higher level, which will reduce the overall benefit of what we are able
to do and reduce the provision of new
homes.

Q
277Paul
Uppal: I want to pull back to the direct payment of
housing benefit—there seemed to be uniform agreement among all
of you about that—to the default position of the tenant at least
having the choice. David, I think you said that—forgive me if I
am paraphrasing—direct payment to the landlord is very much the
preferred option. From what you were saying, it seems that from the
landlord’s perspective it was previously a much more benign
environment when they received housing benefit payments directly. Did
the four of you notice any correlation between the change when housing
benefit went to the tenant rather than to the landlord and fewer
private tenants claimed housing benefit? Was there a correlation? Do
you follow my logic?

David
Salusbury: Yes, I do. If I understand you correctly,
you are asking, “If it has not made any difference, why the
fuss? Why the concern?”

Q
278Paul
Uppal: As you said on behalf of your members, landlords
would probably prefer the benefit to be paid directly to them.
Therefore, in a less favourable environment, as the system changed from
a direct payment

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to the money going directly to the tenant, was there a corresponding
drop-off in the number of landlords taking up tenants who received
housing benefit?

David
Salusbury: We do not think that there was an actual
drop-off in the number prepared to do business in that sense. The
pragmatists say, “My business has to continue.” We have
noted, however, a gradual increase in problems associated with arrears
and late payments. To an extent, it has become harder for the landlord
to administer the lettings without that certainty. In some cases, it
has become more difficult for the tenant to administer their side of
the tenancy because of—how would one put this?—the
temptation to use the money for things other than rent. That has
certainly increased. The restoration of that degree of certainty is
probably what unites the four of us. It seems sensible. Nobody could
argue with the view that we must empower people and seek to include
them. That is obviously sensible. The flipside to that is whether the
individual would also be empowered if they had the choice to ask the
benefit to be paid direct to the landlord. Is that not in itself a form
of empowerment?

Q
279Paul
Uppal:I buy into exactly what you are saying. I
just wonder whether, in that investment environment—we are
talking about hard-headed investors in the private sector—when
things were more difficult, landlords would have preferred to have
tenants from a private background.

David
Salusbury: Definitely a mortgage provider for a
serious buy-to-let proposition is going to be interested in the type of
tenants that are on offer. In the main, they are less interested in
properties that are tenanted by benefit claimants because of the
unreliability that that situation tends to bring in its wake. That is a
pragmatic view taken by mortgage providers. If one were to find some
way—as we are discussing—of restoring a degree of
certainty, the barrier to investment would theoretically be removed.
There is a compelling argument for going down that route, but it is
going to become more complicated when the universal credit is
introduced. There is a case for doing it now, as a means of easing the
transition into a lower LHA
regime.

Roger
Harding: During that period, I looked at some
research by Shelter. It is hard to get trend data, but we came across a
few cases of landlords who in effect had a “no DSS”
policy. One of the main factors for that was housing benefit
administration, which is often complex in itself, regardless of direct
payments. The inability to have direct payments was a serious barrier,
and through our advice services we have seen more instances of clients
running up arrears. I do not like the use of the term
“temptation” because that suggests luxuries. These are
tenants having to weigh up paying utility bills and rents and so
on—very hard choices. We have seen a rise in cases of people
running up arrears and having to wait until they have eight weeks of
arrears before they can trigger a direct payment to the landlord. That
seems an unnecessary wait.

Duncan
Shrubsole: The first thing to say is that a lot has
changed in various aspects of the private rented sector over the past
few years, and it is difficult to isolate cause and effect. That is
also an issue looking forward—the growth of buy to
let—and there have been various other pressures. Just isolating
the effect of LHA is hard. As Crisis—this is also in response to

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Harriet’s question—we work with access
schemes across the country that help formerly homeless people into
accommodation in the private rented sector. We clearly know that
landlords have been more willing to take people who they might not
otherwise take and to negotiate on rents when we have been able to
arrange direct payment for them with the landlord. That has the effect
of people being housed who would not otherwise have been and a saving
to the public
purse.

Lots
of things can happen around financial inclusion, and bank accounts are
a massive issue. If you have your housing benefit paid into your bank
account and it is your largest amount, then if you have any debts or
charges come off it, that takes money away from rent and becomes a real
issue. But you tackle that through financial inclusion and not through
LHA
itself.

Lastly,
there was an argument for LHA to be paid directly to the tenant, so
that if the individual has negotiated a lower rate they have the
ability to keep an element of it. Originally, they could keep up to any
amount and then it was up to £15, and that empowered the tenant
to do a bit of shopping around. That has now gone, so the argument for
routing payment directly to the tenant has now gone out of the system
anyway. They have lost that lever, and in any case rents have come down
and we are in a different level of market. Because of the basic
principle that the tenant should be able to choose and come to a
solution that is best for them, better able to give them a housing
outcome where they know they can keep a roof over their head and a
landlord who is more willing to let to them, we think that the choice
of direct payment should be
restored.

The
Chair: Okay. We have put a lot of time into that. Let us
move on to the next
issue.

Q
280Jenny
Willott: I want to ask a couple of questions about the
under-occupation of social housing. As I am sure you all know, the Bill
introduces the same size-related criteria for social housing tenants as
already apply to people on housing benefit or local housing allowance.
What are your views on that proposal, and what do you think is likely
to be the impact on mobility in the social housing
sector?

David
Orr: We are very sceptical about the measures as
outlined. I think that everyone involved in housing associations and
local authorities understands that there is a clear need to use the
existing housing stock as effectively as we possibly can in an
environment of acute shortage. I do not think that this measure will
assist us to do that and, to be honest, to us it looks just like a
means of cutting
cost.

If
you look at the mechanics and imagine a household that previously had
five people living in it and now has three and has to move to a smaller
property, first, you have to find the smaller property—it has to
be available—and there are a range of transaction costs
associated with that. If you are moving from a two-bed home to a
one-bed home, we know that there are not enough one-bed homes in the
market to be able to come anywhere near accommodating the number of
people who are technically under-occupying a two-bed home. Physically,
the property is not there for them to move into.

Some 3% of
properties in London and 43% in the north-east and the north-west are
under-occupied. The problem is that the supply is not geographically
located

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alongside the potential demand. As a means of trying to encourage
movement and more effective use the existing stock, it will not work
and will probably add rather than reduce
cost.

If
the intention is that people stay where they are but receive a smaller
amount of money because they are deemed to be under-occupying, people
who are already on the borderline of poverty will be pushed into
poverty, and we will see people who are not able to afford basic
household bills or, in some circumstances, food. They will certainly
not be able to afford new shoes. This is not a sensible measure to
deliver the outcomes that it asserts it is trying to
deliver.

I
want the Committee to understand that we are absolutely clear that we
want to find ways that incentivise people to move. Very often, we get
trapped into a way of thinking. I am in the position of a traditional
parent whose children have left home, and I want my children and, at
some point in the future, my grandchildren to be able to come and
visit, and putting me and my wife into a one-bed flat will not allow
that to happen. Putting us into a two-bed flat might, but we would
technically be under-occupying. We have to have a much broader view of
the flexibilities needed in managing our housing stock effectively if
we are to meet the demands that are suggested by the
measure.

Roger
Harding: This is a harsh measure of under-occupation.
It is not the measure of under-occupation that is used by the
Department for Communities and Local Government—the bedroom
standard—to measure under-occupation generally. So this only
allows for one additional spare bedroom. In many cases, that is not an
unoccupied bedroom. You could have the slightly ridiculous situation
where a local authority is allocating on the bedroom standard and
therefore allocating a family with two adults and two children who are
aged 8 and 9 and of different sexes a house that allows a bedroom each
for both children. That would be under-occupying according to the LHA
change or the housing benefit change. They would therefore have their
housing benefit docked, despite the fact that when one of those
children reaches 10, they would not be under-occupying any
more.

So it seems a
very blunt measure, and it is very odd that the Government are
establishing two systems of under-occupation rather than one. It is
also blunt in that, as David said, it takes no account of
people’s attempts to move. Mobility within the sector is very
difficult, particularly when there is not a good alignment between
where those who under-occupying live and where smaller properties are.
It will also have an acute effect in rural areas where there may not be
much of a private rented sector for people to move to as an alternative
and there probably is not much social stock as an alternative in many
areas. So even if the tenant is trying their hardest to find a more
appropriate property in their area, they will still find their housing
benefit reduced because of this measure, when instead the measures that
we know work are the measures that incentivise people and work with
people.

Often what is
needed, particularly in the rare but important cases where one person
is in a three-bed property, rather than a blunt benefit cut, is a
landlord or a local authority providing someone who goes to speak to
that person and helps them, particularly where they are vulnerable,
with things like finding removal

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vans, looking for grants that will enable them to cover those costs and
negotiating what can be quite confusing housing option systems. That is
what will allow people to transition to more appropriate property, not
penalising their housing
benefit.

Q
281Jenny
Willott: I want to ask about adapted housing. There are
people who are now under-occupying where there has been a significant
investment in that property to make it appropriate for disabilities and
things like that. Do any of you have any figures on how many properties
that might apply to where the adaptations are so costly that it is not
worth moving that
person?

David
Orr: Yes. This is research that we have done. Our
estimate is that there are 108,000 working-age social-housing tenants
in Britain claiming housing benefit who live in adapted homes with one
or more spare rooms. These are adapted homes, so if they move, the
adaptations will have to be made to the new property. For the
Committee’s information, the average cost of a disabled
facilities grant is in excess of £6,500; a ramp costs
£500; a level-access shower costs £3,500. These are all
significant costs, and they are generally in these circumstances,
although not always, a cost to the state. Whatever else happens, there
should be some very careful consideration of applying this measure to
people living in adapted
homes.

Jenny
Willott: Thank you. That is very
helpful.

Q
282Jane
Ellison: We asked the same question of our previous
witness who is a leader of a London council, representing London
Councils and the LGA. While acknowledging that this was by no means a
complete solution, he felt that local councils would welcome the
flexibility that such provisions would offer. He took a slightly more
positive view of things than you have done. Why do you think that there
is such a discrepancy in
views?

David
Orr: I am absolutely clear that the more flexibility
we have, the better, but this proposition is not about flexibility. It
is about a financial penalty for people just because they happen to
live in a house that has one extra bedroom. As I said earlier, we have
to find the best possible ways of moving people, so that we can use our
housing stock effectively. There are some places where people who no
longer require the adaptations are living in adapted housing. There are
people who live in wheelchair-adapted homes where no one is using a
wheelchair. So we need to create mechanisms that allow for much greater
movement and mobility. Indeed, I chaired a mobility taskforce looking
at some of these specific issues, and some of them have been
incorporated into the Localism Bill, which is very helpful. However,
this is the wrong measure to attack these
issues.

Duncan
Shrubsole: This measure is not saying, “You
have been offered alternative accommodation to downsize and you are not
taking it.” It is just saying, “You are in accommodation
that is too large, and we are going to cut it.” It does not take
into account the intention or willingness of the individual to move
when they cannot because there is nowhere to move to. It also does not
take into account the circumstances of their house, or

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their own circumstances around disability, which you mentioned.
Additionally, in the areas where there is under-occupation, it does not
take account of whether a council or landlord might have decided that
it is better to have somebody in this house for the purposes of how the
street is lived in, to tackle antisocial behaviour for the community.
The people we have to move in there might happen to be slightly smaller
than the house will accommodate, but otherwise those streets
and neighbourhoods will be
empty.

It
is not a measure that is saying, “We have people here we want to
move there, or people here who are moving.” It is a crude cut
across the piece. DWP officials have been clear that it is not about
tackling over-crowding; this is just a straightforward cut, and people
are expected to take the hit. If people are expected to take that hit
then it has an effect on their household income—whether they can
have heating, food, and the other bills that they pay
for.

Q
283Jane
Ellison: So let us take the situation that you presented.
If somebody is offered a move to somewhere that is more suitable for
their household size and they just say no, what would you do, bearing
in mind the pressure on waiting lists and the number of people
desperate for appropriate
housing?

Duncan
Shrubsole: You could say that that was a measure to
explore, but that is not what this measure
is.

Jane
Ellison: But I am asking, what would you
do?

Roger
Harding: In this instance, there is already a measure
for social landlords that allows you to take possession of the property
if you have found someone suitable alternative accommodation. In the
law as it stands, a social landlord could go through the courts to take
possession of the property, provided that they could make the case that
a suitable alternative was provided. So, if we wanted to tackle it in
that way, the law exists for social landlords to do
that.

Q
284Jane
Ellison: Can I push you—do you think taking someone
to court is any less draconian than proposing a benefit
cut?

Roger
Harding: I do not think that it is an ideal
situation, but this is of far more concern, given that it involves
stripping away the housing benefit of hundreds of thousands of people,
and with a large saving aligned to it. If the DWP believed that this
would actually work and free up accommodation then they would not be
aligning the amount of saving to it that they have, because you only
get the saving if people stay in the home and take the benefit
hit.

Q
285Ms
Buck: On that point, assuming that, for argument’s
sake, everybody notionally impacted by this cut seeks to avoid it,
could the sector make alternative offers of accommodation to everybody
who sought to avoid that penalty over the next two
years?

David
Orr:
No.

Q
286Ms
Buck: Excellent. Also, could you tell us how you see the
attraction between local authority allocation policies and the status
of housing association tenancies

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and so forth. For example, were Mrs Smith in a
two-bedroom flat in Watford to make an application to avoid
the penalty, would she be able to request that Barnet council provided
her with alternative accommodation, or would anybody be able to do
that?

David
Orr: She would be able to make that request, but her
assessment would be on the basis of where she was prioritised by Barnet
council and its allocations policy. There is a whole range of
institutional factors, which are rather inflexible at the moment, that
would benefit from being freed up very substantially. One of the points
that we made on our mobility taskforce and in discussions about the
Localism Bill was that when a property becomes available the
local authority, understandably, will always want to nominate someone
from the top of the housing list directly into that property. We want
to create chains of moves, but that takes longer, much more
negotiation, and it means that there has to be a bit of give
and take. However, it is much more likely to deliver the outcomes that
we are talking about here. So I think there is a real willingness to
explore how to do it, but there is a very strong view that this is not
the
way.

The
Chair: We move on to setting local housing allowance
rates.

Q
287Kate
Green: Mr Harding, you have already mentioned your concern
about linking benefit levels to CPI, rather than to rental levels in
the rental market area. Can you expand on what you think the impact of
this will
be?

Roger
Harding: The impact over the long term will be a
stripping away of the value of local housing allowance. We have seen in
the past that rents tend to rise at a faster rate than the consumer
prices index. That is driven by the fundamentals of supply and demand
in the housing market. Successive Governments have not built enough
homes, particularly affordable homes, so we are seeing rising house
prices, typically on trend, and we are seeing rising rents as well.
That means that it is outstripping CPI. That will mean that more and
more areas become unaffordable. Research that we have done at Shelter
together with the Chartered Institute of Housing has shown that, once
you play that policy over 10 years, at least a third of local
authorities across England become unaffordable. That quite quickly
strips away the value of the policy.

The
comparison with the basic state pension is a particularly pertinent
one. The Government have recognised that it was a mistake to decouple
it from earnings and that it was not a dramatic cut in the first year
or two but, spread over 10 or 20 years, it was a very dramatic cut.
This has the potential to be the same, if not worse, because housing
benefit, unlike other benefits, has a spatial element to it. In areas
where rents grow fastest––you would imagine those areas
to be areas of economic growth––you will see rents
outstrip benefit rates and drive people out of those areas. You could
also see benefit claimants being driven away from the areas with the
most employment opportunities. Some case study analysis that we have
done shows just that effect. If you had imposed this change 10 years
ago and run it forward, you would see that within market areas, quite
quickly the areas with the greatest number of job opportunities become
unaffordable and people are pushed out into areas where even the
transport links make it very hard

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for someone to get a job. A final consequence is that it is more likely
to drive people into benefit dependency, because it is going to push
them away from the labour
market.

Q
288Kate
Green: What is your view on the Government’s
argument that the way in which we uprate benefits is better reflected
by using CPI and the treatment in CPI, compared with RPI, of housing
costs?

Roger
Harding: There has been some confusion in this
debate, suggesting that we are moving with housing benefit from RPI to
CPI as is happening with other benefits, which is not the case here. We
are moving from using local rents and broad market rental areas and
moving towards CPI, so that is a very different change. That is very
important because housing benefit has a spatial dimension that does not
apply to other benefits. There is no London or regional weighting to
other benefits. There is in housing, because housing costs vary so much
by region. I do not buy the argument that that is a more sensible
uprating. Rents only make up about 5% of the CPI measure. The reason is
that the majority of people do not rent, so it is not in their
household basket. It is a very odd measure to use. At the moment, CPI
is running at 4.5%. Undoubtedly, that is going to be a higher rate than
rent inflation in certain parts of the country. If you had that policy
in place, you would find you were overpaying housing benefit in some
areas and underpaying in others. If the Government are very certain
that their other previous changes to LHA will reduce rates, including
the LHA caps, I do not see a problem linking future payments with
rents.

Q
289George
Hollingbery:There is surely some tension here
about the Government feeling that landlords will push rents as hard as
they can, knowing that the Government stand behind LHA. How do the
Government deal with that problem if is not by imposing a mechanism
different from what we have
now?

Duncan
Shrubsole: To repeat some of what was said earlier,
first, we have always accepted that in the benefit system there is one
element which has to take account of the actual costs of living in a
locality. JSA and other rates are set across the country, but in order
that people can live near areas of better economic activity, we take
account of that through the benefit system through housing costs.
Secondly, half of people already face a shortfall. It is quite a
significant shortfall of about £23 a week. Thirdly, the
Government have already said, “Okay, we used to set local rents
at 50% of the market; now we are setting them at 30%.” The
argument is that that will have an effect and we need to see how it
plays out, but it still provides some linkage to actual
rents.

Lastly,
the Bill proposes to move to CPI and to stay with CPI for ever, in
terms of basing the intentions. We need to make sure that there is a
measure whereby, if they propose to go ahead with CPI, not only DWP
Secretaries of State but, given the fundamental importance of this to
our housing policy, Communities and Local Government Secretaries of
State are committed to a periodic review—ideally annually, but
at least on a regular basis—to look at the extent to which
people’s buying power and landlord behaviour have changed and
whether we need to rebase rents. At the moment, there are no such
safeguards in the Bill. As Roger said,

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looking at the extent to which pension-buying power
diminished when the link to earnings was removed, with the move to CPI
you will very quickly see a divergence that will have a knock-on impact
for individuals and landlords over the
years.

Q
290George
Hollingbery: This is probably my ignorance —I do
not see where the CPI move is in the
Bill?

Roger
Harding: It is not in the Bill. We know that the
Government want to link LHA to CPI, because they have made various
statements about that from the emergency Budget onwards, but it is not
stipulated in the Bill. Clause 11 will bring forward a lot of other
measures, and one particular concern is that many big future changes
could be made to housing benefit without legislation being brought into
Parliament and receiving the level of scrutiny that this Bill is
rightly
having.

Ministers
have said that they do not expect housing benefit to be linked to CPI
for ever, but they have given no assurances that that commitment will
be written into the Bill in any way. As I say, the comparison with the
basic state pension is a very useful one, because once something like
this sits on the statute book it tends to sit there for a while and
have a deeply corrosive effect over several years. This is an important
opportunity to make sure that at least we have a stipulation that the
CPI will not be there for
ever.

Q
291George
Hollingbery: Can we agree between ourselves that CPI is
not in the Bill? While there are strong Government suggestions that
that the CPI will be followed, that is not in the
Bill.

Roger
Harding: They have made it clear that they will use
the Bill to bring it
forward.

Duncan
Shrubsole: But they have not suggested any other
alternative. The big issue to cross is that, wherever you sit on the
political divide over the Bill, we need to have more information about
what is proposed across a range of areas, housing costs being a key
one.

The
Chair: We move on to the final set of questions in this
session.

Q
292Paul
Uppal: I have a more generic question—some of this
will already have been covered in your submissions —on the
overall impact of the benefit cap on housing benefit and how it will
affect families. Roger and Duncan, as time is pressing, would you like
to give your views from the sharp
end?

Roger
Harding: We are deeply concerned about the overall
benefit cap and we are opposed to it. As I mentioned before, what vary
most in the benefits system are housing costs. It is not acceptable to
be in the position that we find ourselves in, with housing costs being
so high in areas such as London and the south-east, but other areas as
well. That needs to be solved through long-term supply. What will not
help is to punish the poorest for the failure of successive Governments
to build enough
homes.

It
is important to state that the benefit cap affects quite a range of
families. Fundamentally, it starts to undermine the safety net that the
welfare state was set up to provide. Analysis that we have done at
Shelter

Column number: 150

shows that much of the south-east will become
unaffordable to three-children families, because of the cap. For a
typical family of two adults—with one or both working—and
three children, if both parents lose their job they will suddenly face
not receiving enough housing benefit to live not only in their town,
but in their
region.

A
blanket cap will be imposed on most of the south-east and London. It is
a fundamental principle of any welfare safety net that if,
unfortunately, you become unemployed—something we are very aware
of in current circumstances—the state provides you with enough
support to remain in the area in which you currently live to get
yourself back on your feet and to look for another job. People with two
children, and particularly people with three or more children, will
suddenly be faced with a horrendous choice between cutting back on the
real essentials, intentionally overcrowding their family or moving a
substantial distance away from their children’s schools, their
family networks and probably employment
opportunities.

Q
293Paul
Uppal: Do you have a definition of overcrowding? Are there
criteria that you guys particularly use?

Roger
Harding: There is one that the DCLG uses, which is
the bedroom standard. It is quite complex because it depends on who is
in the household. You have to take a household and then judge. For
example, young children are expected to share a bedroom, but after the
age of 10, if they are of different sexes, they get another bedroom.
Clearly, by that standard, they would have to overcrowd. I can give you
more information on the exact definition and an indication of how many
people would be
forced.

Q
294Paul
Uppal: I would be interested in a clarification. When I
was a child, I used to share with four other children. What would my
definition
be?

Roger
Harding: In one bedroom? That would be overcrowding
by that standard. While that may have been the case for yourself, it is
clearly an unacceptable position in the 21st century. I would not,
simply because Members of the House and many other people have found
themselves in that situation in the past, accept that that is what our
welfare state should deliver in the 21st century. As I said, it should
be a safety net that if people find themselves unemployed, they should
not be suddenly penalised by having to move town or area or having to
cram a lot of children into a single bedroom. That just does not feel
appropriate in any way in a truly modern welfare
state.

Q
295Anas
Sarwar: I want to follow up on your point about people
potentially being forced to move as a result of the changes. You
mentioned that it was specifically a problem for London. Have you made
any assessment on whether that is a risk anywhere else, such as
Scotland or other parts of the UK? Is there a risk
elsewhere?

Roger
Harding: There is a risk elsewhere—in
Scotland, Wales and many other areas in England. In those areas, it
tends to affect even larger families. Our analysis was purely on
three-child families, and most of the impact there tends to be focused
exclusively on the south-east and London. However, as you increase the
number of children in a household, many more areas in the country will
be at risk.

Column number: 151

Q
296Anas
Sarwar: Are data available about the possible impact on
parts of Scotland, for
example?

Roger
Harding: There is, and I can provide them
afterwards.

David
Orr: I think some of the things that we have been
discussing this afternoon are distorted by the particular housing
market of London, but most of them are general to the whole country. I
know that the Scottish Federation of Housing Associations has submitted
evidence to the Committee that identifies the same issues. There are
concerns about direct payments and under-occupation because they will
have an impact on communities right across the whole of
Britain.

Duncan
Shrubsole: On the affordable benefit cap, first of
all, to build on what Roger was saying, there is an assumption that
people claiming benefits have always been claiming benefits. Actually,
there are people with large families who for some reason—perhaps
one parent dies or gets into trouble—have to be reliant on
benefits for at least a temporary period while they look to go back
into work. Local housing allowance is a benefit where 26% of claimants
are in work. An increasing number of people are doing what has been
asked of them, which is to reduce their hours so that a company can
stay in business. Housing benefit is an in-work
benefit.

Secondly,
a key concern that we have on this Bill is about how it does or does
not link with the Localism Bill. In the Localism Bill and the proposed
new structure of affordable rent with rents for new social
housing—80% of market rate—we are proposing to repeat
some of the mistakes of the past, which is letting the housing benefit
bill take the strain and not investing in social
housing.

Lastly,
just to put on the record, there is now a new cap that affects single
people as part of the affordable benefit cap that was not in the
original announcement. That will particularly affect single people in
some forms of supported accommodation, where the rents are higher
because of the level of support that they get through that facility.
The cap will affect them too, and we need to be aware of
that.

David
Orr: There has been an undiscussed issue about of all
this, which is supported housing. The new system for developing new
stock, which is part of the DCLG proposal, will not provide new
specialist supported housing. The impact of the way in which housing
benefit operates and the way that it supports some of the people who
are in supported housing, who are some of the most vulnerable people in
the community, has not yet been properly thought through and is likely
to be quite profound. I spent most of my morning today at St
Mungo’s, talking to people working there, and the impact of the
changes that they see coming over the horizon, on their ability to move
people into settled accommodation and on being able to continue to
afford to do what they are doing now, will be quite
profound.

The
Chair: Order. We have run out of time. Thank you,
gentlemen, for giving evidence to the Committee this
afternoon.

4.15
pm

Q
297The
Chair: We come to our last witness of the afternoon, the
Secretary of State for Work and Pensions, the right hon. Member for
Chingford and Woodford

Column number: 152

Green (Mr Duncan Smith), who I think we all know, but perhaps he could
introduce his two colleagues to the
Committee.

Mr
Duncan Smith:May I introduce Neil
Couling, who many in the Committee will already know? He works in the
Department for Work and Pensions and is responsible hugely—he is
the expert—for most of the figures we will deal with, as they
are quite complex. Also, Terry Moran, who is essentially heading up the
universal credit programme. Most Committee members probably already
know both of
them.

Chair,
with permission, on Second Reading I promised that I would inform the
Committee as we bring more information forward about some of the
changes. I wondered if it was possible for me, on three items, to read
some notes to the Committee, informing it of some changes we will bring
forward—one on disability, one on the capital tests and the
other one on how we intend to pay some of the benefit changes. Would
that be all
right?

The
Chair: Briefly, because we have quite a lot of
questions.

Mr
Duncan Smith: I will try to do it as briefly as I
can.

The
first point is about the changes to the rather complex disability
payments at the moment. There are seven additional payments for
disability, three different disability premiums, two components in
employment and support allowance, and two further elements in the
working tax credit, each with their own rules and qualifying criteria.
The resulting maze is quite difficult to
deliver.

For
example, a single person could receive a severe disability premium if
they also receiving either the middle or higher rate of the disability
living allowance care component, does not have a carer receiving carers
allowance for providing care for them and who also technically counts
as living alone. Someone on the highest rate of DLA might also get an
enhanced disability premium, though this is also paid automatically to
people who receive the support component of the
ESA.

Individuals
in work could receive a disabled worker addition if they had been or
were receiving a qualifying benefit, were considered to be at a
disadvantage in the labour market because of disability, and an
additional element for severe disability if they also receive the
higher rate of the care component of DLA—I am sorry, I am
rattling through this quite quickly, but it is quite complex. If people
receive housing benefit or council tax benefit, it could include the
basic disability premium. What we have is a fairly complex and
difficult system to understand, with an awful lot of overlapping
issues.

The
introduction of the universal credit offers us the opportunity to
simplify this and to do away with some of the complex range of
benefits. In finalising this design in the new system, we will
obviously be mindful of the fiscal situation but, despite this, we will
reshape and completely recycle all the money that is already available
within these various premiums that exist in three of the areas,
including the tax
credit.

In
future, for adults, universal credit will have one single gateway and
two additions to reflect the fact that people whom we expect to remain
on universal credit for longer have higher costs. The arrangements will
broadly mirror the current ESA approach, with eligibility for the two
components determined by a single assessment.

Column number: 153

People entitled to either addition will also benefit
from a more generous earnings disregard, meaning that a household
containing a disabled person can earn up to £7,000 a year before
the taper moves in. People will keep the additions as they move into
work.

Using
resources from our reforms to the existing disability premiums, we aim
to raise in stages the level of the support component equivalent in
universal credit to £74.50 a week. This is significantly higher
than the basic £31.40 a week in the current system. It is also a
significant increase to the differential between work-related and
support components. The differential is currently around £5 a
week and will rise to over £48 a week.

For disabled
children, we aim to have two additions paid at the same rate as the
adult components. This means there will be increased support for the
most severely disabled children. As now, eligibility for these
additions will rest on receipt of DLA for the child. In addition, we
will expand eligibility to the higher addition so that severely
visually impaired children will also be able to receive the higher
rate. In many cases, therefore, people will be better off under
universal credit. For claimants whose universal credit award will be
less than now—for example where people receive the severe
disability premium—as a direct result of the move to universal
credit, we will provide transitional protection as already
agreed.

I
am sorry that that was quite complex. It will be circulated; it is
going to be posted. I promised that I would explain what was happening
to those on Second Reading. I have two other much shorter
announcements. Do you want me to make
them?

The
Chair: I think it might be more appropriate to circulate
them to the Committee, as we have limited time to get through the
questions.

Mr
Duncan Smith: Okay. I will be guided by you. One is
simply on capital and the other is on payment, which we may get to
anyway in
questions.

Q
298Priti
Patel: Thank you, Secretary of State, for that
introduction. We have heard a great deal about universal credit from
witnesses so far. I would welcome your views. Could you provide an
indication of the number of families where there is long-term,
inter-generational welfare dependency, and could you explain what
effect the universal credit is likely to have on such households, in
terms of incentives for getting them into work, and behavioural
change?

Mr
Duncan Smith: As the Committee will know—it is important
that I explain this—we have not made any assessment for what I
call dynamic effect. We and the Treasury have agreed that we work
simply on the basis of things such as take-up. We do not assume that
greater effect will take place as a result of changes in individual
lives. However, I do personally believe that will happen.

The changes
that we make with universal credit are hugely supported by the Work
programme—they should be seen as two sides of the same coin.
Universal credit is particularly aimed at those groups. The problem we
have had for years is that when we try to understand why groups have
long-term and often family-conditioned unemployment, we have to realise
that for many there

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are no real incentives to move beyond an experience they understand to
one they do not, such as unemployment versus work. To do that they have
only one thing that I guess acts as an incentive, and for the most part
that is money. There needs to be an understanding that, if they do make
that shift and change to a wholly different culture, they have to do it
first of all because it pays—that is the whole point about work
paying—and particularly on the lower level of hours. As people
will see with universal credit, the benefits are quite significant,
particularly for those first entering work.

The second
aspect, with the Work programme that comes later, is that the mentoring
side of it will enable them to be sustained in work, because they will
meet some very big challenges in a cultural sense as they go into work,
not being able to stick the job. We often see a lot of rotation taking
place, with people who have gone into work. It is easy in a sense to
get people into work, it is less easy to help them stay in work until
they get what I call the work habit. A direct answer to the question is
that universal credit is particularly aimed at that group of people, so
that we give them that single incentive about going back to work: that
work pays. They do not see that there is a marginal shift; in fact,
they do not even believe that there is no benefit to them going back to
work. Most of all, the simplification of that back-to-work
process—getting rid of so many of those complex withdrawal
rates—should also have an effect on their understanding. It is
critical that they understand without having to go into the Jobcentre
to ask for guidance. They will understand how much money they hold in
their pockets after they have finished
work.

Q
299Yvonne
Fovargue: Trying to determine winners and losers can only
be an estimate because we do not have a lot of detail. For example,
what income is going to be treated as unearned income? Will it include
statutory maternity pay and widow’s pension? How are the
passported benefits going to be treated? When will that detail become
available? Will there be any further equality impact assessments,
particularly given the announcements you have made
today?

Mr
Duncan Smith: First, as we make further announcements
and changes, where relevant and where we are required to do, we will
make sure that those assessments are properly presented to both the
Committee and the House. There are issues such as passported benefits
that I think you were referring to. Most of these lie beyond the scope
of the Department so we have to resolve some of these issues like free
school meals. There are several issues that are not directly in our
control but, interestingly, historically they use our benefit figures
to set their own payments. So what we will do and what we are doing
right now is to discuss the issues with each of the Departments
concerned to make sure that the level they are setting it at is
relevant to the universal credit and does not act as a work
disincentive.

I shall try
to get the Social Security Advisory Committee and the Cabinet Social
Justice Committee to create that scope to make that recommendation to
each of those Departments so that we can begin to control to some
degree how that works and make sure that they understand the trade-offs
between the universal credit’s requirement to keep work
incentives and their requirement to support people in a variable amount
of ways, including things like free prescriptions and so on. That is
the process we

Column number: 155

are going on. You asked when. I believe that during
the Committee stage we should be in a much stronger position to make it
much clearer how we will do that. That was an undertaking I gave on
Second
Reading.

Q
300Yvonne
Fovargue:You predicted a considerable amount of
saving on fraud and error. Where did you get the figures that lead you
to believe this will
happen?

Mr
Duncan Smith: These are figures that we calculated
with the Treasury, and through our historical understanding at DWP of
how this works, and with HMRC. We believe that two or three things will
happen with the introduction of this simplified system. A lot of this
is error which masquerades as fraud. We know that and it is important
for us to recognise that not everything that goes wrong is down to
fraud. Often it is down to error. Some of it is legitimate human error.
One of our biggest problems is the confusion about when people are
meant to notify and whom they should notify about changes in their
lives.

If you take
universal credit at the moment, while somebody is in work we will pick
up almost automatically with the real time system when their hours
change. We will not require somebody to then notify us and to make a
reconciliation subsequently. That will automatically be picked up and
then transmitted back. If they do have to notify the Department, they
will only have to notify us once. There will not be a complex set of
notifications such as over here because it is a tax credit and over
there because it is a benefit consideration. Just by the very
simplification of this we should get down to eradicating a lot of the
unintentional error/fraud that goes on. That is quite a
consideration.

On
the other side, we are planning to spend and invest a significant
amount of money in beefing up our fraud inquiry teams who will be free
to look at the greater levels of fraud that exist within the system.
Those calculations have been agreed between us and the Treasury and we
are in discussion still with the Office for Budget Responsibility about
recognising the full extent of those
savings.

Q
301Ms
Buck: A quick technical point for the Committee’s
clarification: can you remind us how many households you expect will go
into the universal credit when it is introduced and what figure you are
working on of the number of households where two generations are
workless?

Mr
Duncan Smith: Let me start with the first bit and I
may bring these other two in as they have a far greater command of the
figures than I do. Neil, do you want to have a quick stab at that
one?

Neil
Couling: Essentially, for the conversion of universal
credit, there are about 19 million different claims. But that is a
multiple series of claims for people who are in receipt of housing
benefit, tax credits and the income-related benefits. By the time you
get to the complete roll-out of universal credit that reduces to about
8 million live claims. So we are taking 19 million and turning it
into 8 million. Underlying that there are 8 million households
claiming multiples of all of
that.

Q
302Ms
Buck: And the figure for the number of households where at
least two generations are workless? We talk about intergenerational
worklessness a lot and it would be good to have a specific
figure.

Column number: 156

Mr
Duncan Smith: We do. I would be happy to come back
with a specific figure for the Committee. I will not do so immediately.
We work on the principle that a fifth of all households have no work at
all, but obviously we can define that exactly. I do not want to give
you a general figure when I can give you a specific one and I am very
happy to do
so.

Q
303Anas
Sarwar: Good afternoon, Secretary of State. I wanted to
ask about transitional protection and get some clarification of what
kinds of event are likely to qualify as a change in circumstances and
cause claimants to lose their transitional protection. For example,
could small changes in circumstances have a significant impact on a
household’s benefit income? How long do you envisage the
traditional prediction lasting? We have heard evidence from a number of
people who are concerned about the high level of change in
people’s circumstances and its potential impact on hundreds of
thousands of families.

Mr
Duncan Smith: First, the transitional protection is
best described, I suppose, as a cash protection. That is to say, we do
not envisage it being upgraded over the years in line with inflation or
with how other benefits change; it is a cash protection. It is there,
most of all, to ensure at the time of change that whoever is affected
by that change need not decide immediately what they must alter in and
around themselves and in their lives. It gives them time to figure out,
under the new system, what is best for
them.

Take,
for example, lone parents working 16 hours. That is where they have
clustered, because that is where they have had the greatest payment. It
will allow them to stay with that payment and then figure out whether,
for considerations of their own care, they might be better off at 14,
or whether they might be able to take jobs on offer at 18, 19 or 20
hours. They can look at that and figure it out, and then when they make
the change, it is a conscious decision. We believe that the majority of
people will make a conscious decision to change their hours in
accordance with what they need, because they will recognise that for
the first time, they can now do so and not lose money, relatively. If
they go up in hours, they are better paid, and if they go down in
hours, at least they can be paid for that, whereas before, they would
not find that at all advantageous.

At the
moment, we are considering carefully what might trigger those. We do
not anticipate in any shape or form that there will be a cliff edge or
drop-off. We are considering it, but we think that the best thing to do
is consider how it is staged depending what decision people make. But
that is still under review, and I will come back to the Committee with
a greater sense of that.

What triggers
that? How big a change in a household would be needed to trigger it? We
are still discussing and debating that particular area, but again, I
promise that I will come to the Committee with greater details of that
before the Committee stage is over. I stand by that. We are just making
some final decisions. We are consulting a lot with most of the groups
that you have spoken to, and we are asking lots of questions about what
they think the trigger points are. We want to try to get that
right.

Q
304Anas
Sarwar: On that principle, even a minor change will not
necessarily mean a change of circumstances?

Column number: 157

Mr
Duncan Smith: Again, it depends hugely on what we
define as a minor change. We could all say that a minor change will
not, but then what is a minor change? Your view of a minor change might
be different from mine. That is what we are trying to do. Neil, is
there anything you want to add to that?

Neil
Couling: The transitional protection is not time
limited, first of all. Essentially, because it is a cash transitional
protection, changes in income will erode transitional protection, but
if there are wider changes, such as a change in entitlement—say
somebody no longer qualified for universal credit—obviously the
transitional protection would end then. You would not just pay a bit of
transitional protection then. Say, for example, that the claimant left
the country. The transitional protection would end along with the rest
of the universal credit entitlement.

Mr
Duncan Smith: I think that you are more worried about
the minor stuff. I accept that. I think that that stuff is easier to
understand.

Q
305Anas
Sarwar: I suppose that a better way of
putting it than “minor change” would be to ask: is it
safe to assume that not every change will result in a change in
circumstance?

Mr
Duncan Smith:Again, it depends exactly
what those changes are. We do not anticipate that every single change
will. Some adjustment changes are not relevant to a change in status,
but there may be other changes that we think indicate a change and a
move, and we are considering that at the
moment.

Q
306Jenny
Willott: Secretary of State, I know that it is not
completely clear yet what changes in circumstances would cause somebody
to lose their transitional protection, but has the Department done any
estimates of how long you think people will receive transitional
protection? Some of the evidence that we received from witnesses was
that the average number of changes of circumstance reported to the
Department is about six in six months, whatever they might be. It might
be for very short periods that people might get that
protection.

Mr
Duncan Smith:On average, it is mostly
income rises that make that change, in general, when we look back over
the nature of what happens to people. Within a two to three-year period
most people naturally, before it arrives, would have changed their
circumstances for one reason or another in a way definable as being no
longer relevant to the transitional protection that we are
anticipating, even under universal
credit.

I
do not know. My personal sense, for what it is worth, is that with
universal credit we may see a naturally higher level of cycling
through. Right now, under the system, it is very difficult to make
small variable changes in what you do, because it does not pay you to
do it. But with universal credit, because it spreads it out, people
will find that they can move up and down the hours with greater freedom
than before, because those hours will pay. So I suspect that, compared
with the current average time it takes everybody to cycle out of their
situation, we may find that they cycle out much quicker under universal
credit, because the options are much greater. We have looked at the
numbers, and we think that, within the point about income changes, that
will actually be the case.

Column number: 158

I do not know
whether Terry has anything to
add.

Terry
Moran: I have nothing to
add.

Q
307Jenny
Willott: It strikes me that there is a potential concern
about the impact on the work disincentive. If someone has transitional
protection until a significant change in circumstance, it might make it
riskier to take work. It is one thing if they are already in work, but
if they are looking to move into work, it could make the jump into work
more risky if they lose their transitional protection. If their income
is protected for a certain period of
time—

Mr
Duncan Smith: If they are coming into work for the
first time. If they are stuck moving from no work to
work—

Neil
Couling: I understand the question that you are
asking. The answer is, no, there is not a bad effect on their work
incentives. This is how the transitional protection works: say, for
example, your entitlement is £100 of universal credit and you
have transitional protection of £20 on top of that, your UC
taper would start at £120, rather than starting at £100
for somebody else. So if you imagine two lines going like that, you
stay on that line with your transitional protection, assuming that
there are no other changes. There is not a disincentive effect of going
into
work.

Q
308Jenny
Willott: So going into work would not count as a change in
circumstance that would mean that you would lose the transitional
payment?

Neil
Couling: No. That is why I was very careful in my
evidence to talk about income, rather than
earnings.

Mr
Duncan Smith: I thought you were talking about moving
out of wok and then back into
work?

Jenny
Willott:
No.

Mr
Duncan Smith: I am sorry, I misunderstood you. Thank
you for understanding the question,
Neil.

Q
309Kate
Green: Witnesses have told us that the policy choice is
between either getting people into work at all or getting them into
sufficient work that they are lifted out of poverty, and the policy
choice that has been made is to get them into work at all. What
assessment have you made of the likely impact of that on in-work
poverty and on women’s participation in the labour market where
they are in couple
households?

Mr
Duncan Smith: I have not brought the figures with me,
but we think that there would be quite a significant effect on in-work
poverty. We think it will be a very positive effect. I will be in a
position to give you some much better figures for that later on. We
have looked at it, and we think that there will be a significant
positive effect on in-work poverty. We think it will do more for
improving in–work poverty than almost anything else that we have
been able to
do.

The
other thing is about women in work. I know you have posed that question
because we are looking at household income, and because the first
person to work will benefit more now than they did before. The second
earner, one might argue, is more likely to be the woman of the
household. The only difference that it makes is that the first person
is more likely to have an income that is likely to lift that household.
The second person is

Column number: 159

still free to enter work and add to that income, but the pressure on
them to do so will not be so great. In other words, they will be in a
position to make that choice, rather than it being an imperative. They
may be able to match that with their caring responsibilities at the
time.

Q
310Kate
Green: But are you not concerned that that will
disincentivise second earners from taking up work because the clawback
rates will be quite high? That will, in time, potentially compromise
women’s economic independence and put them at risk if a
relationship subsequently breaks
down.

Mr
Duncan Smith: I do not see that. The situation that
we have at the moment is that, in households with two people, the
second earner is under enormous pressure to work because it has been a
conscious decision that the first earner’s entry into work,
particularly through part-time hours, simply does not pay enough to
lift them above that line. So the pressure on the second earner to go
to work is about having to go to work to get an income to make that
family sufficient, or have an income that is sufficient for them to get
by.

What we
believe will be the case with universal credit is that the first person
into work will create a more sufficient income. The second earner will
then be earning essentially to top that income up, if that is what they
choose to do. That gives them greater scope to be able to make that
decision. In all the work that I have ever looked at on people making a
choice about going to work, most people are going to work at this stage
because they have to go to work, in the areas that we are talking
about, to earn an income. They have very little choice about that. They
have to go because if they do not go, that household’s income is
simply not enough. What universal credit will do is give them the
liberty to be able to make that choice so, while that pressure is not
on them to go to work—they will still make the conscious
decision if they wish to go to work—that will still be a useful
addition to the family
income.

Q
311Kate
Green: But will it not actually limit the choice, in that
it will disincentivise the second earner, because the gains for a
second earner going into work will actually be
reduced?

Mr
Duncan Smith: It is interesting that you use the word
“disincentivise”. At the moment, I would not call the
system that we have incentivising the second earner. I would call it
forcing the second earner to have to take that work because the first
earner is incapable of earning enough money to free that household.
That affects lone parents dramatically, because they have no second
earner in the household. Therefore, other than 16 hours, that is where
they struggle. They bunch up around one set where the Government have
decided to subsidise one level of work. My point is that that helps
lone parents enormously to make that choice fitting with their caring
responsibilities, which, after all, is a major bonus for
them.

The second
point is that if we are not careful we tend to look at this from the
glass-half-full point, which says there is something desperate because
they are disincentivised. I do not think that that is the case. The key
thing here is to see that they must bmore able to make that choice
because they have the scope to make that choice. It may be that the
woman is the one who goes into work first as

Column number: 160

the main earner, and the man might take that decision separately. In
other words, I think it balances it out much better than it does at the
moment. I see the present system as really forcing the second earner
into work, because they simply cannot afford to get by unless that
second earner works. That is not much choice,
really.

Q
312Paul
Uppal: Secretary of State, thank you for the figures,
which we spoke about earlier, that you are going to provide in terms of
intergenerational benefits. On the specific point about
disincentivising, do you not see the ethos and idea of setting
parameters and a work timetable for families as sending out a really
positive signal about work as a route out of poverty and as the
solution?

Mr
Duncan Smith: The point of universal credit is,
ultimately, that it provides. I cannot remember who it was who asked
the question about in-work poverty. It will have a big effect on
in-work poverty. If I can just think of households rather than
individuals, the key thing about this is that all households need work
if they are to emerge properly out of poverty and take control of their
lives. As opposed to saying that everybody in the household absolutely
must work, the point is that they can make the decision about that. It
is far better that they make a decision about how they do that. When we
look at household income we are able to show, through universal credit,
that by taking that work it pays, and that by taking that course you
will lift your household out of poverty and eventually move well beyond
and take control of your lives. Universal credit is at the heart of
trying to resolve household poverty, which ultimately feeds into child
poverty as well. We can see the figures from that when we talk about
the numbers that are lifted out of poverty—some 600,000 adults
and 350,000 children—just on the static set of universal
credits.

I said
earlier that I make no assumption about dynamic effect. The IFS
originally, some years ago, made assumptions about the dynamic effect
of the sort of system that we are talking about. The Centre for Social
Justice made assumptions about dynamic effect. We have made none. In my
heart, I believe that there is dynamic effect, but I am not laying
claim to that until we have seen the figures. Even without that, we see
a significant number of people lifted out of poverty, as we define it
today. That has to be a good thing, and that is through universal
credit.

Q
313Stephen
Timms: Secretary of State, you have indicated that there
are some important details that have not yet been decided, but you will
be able to tell us about them before the end of the series of Committee
sittings ahead. Are you able, though, to confirm that the Committee
will see each set of the regulations referred to in the Bill, or at
least a summary of what those regulations will do, before we reach that
clause in the Committee’s debates? Without that, I think the
Committee would have some difficulties. Specifically, can you tell us
how child care costs will be supported in universal credit and whether
we will see those regulations ahead of the Committee’s debate on
clause 12?

Mr
Duncan Smith: Those are one and the same question, so
if I deal with them within child care, I can deal with it more
generally as well. It is my intention, as

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far as is humanly possible, to make sure that when
you reach that stage of the Bill, I can give you all this information.
The commitment I make throughout is that, before the Committee stage is
over, all this information that we are referring to should be
available. There may be some limitation within that as to how we go
about this. Child care is one of the areas where I am desperately
trying to get as much view and opinion as possible from stakeholders in
this as to how they would best see the way that we want to set child
care.

There are two
things that are important and at the same time quite difficult. We are
dealing with child care through universal credit, but as I think one of
your witnesses said earlier, “This is about universal credit;
don’t expect child care through universal credit to resolve the
larger issue about child care more generally.” That is my point.
We are trying to resolve something through universal credit, but we are
not resolving all of child care. There is a wider debate to be had
about that. I am trying to focus on how, through universal credit, we
can deliver the necessary child care––which we have
committed to, and committed to at the level of finances at present
available, but which will hopefully in future increase. But there we
have to set what we think is best and how that is spread and where that
goes. I hope to be able to come forward to the Committee with those
sets of options so that there can be some greater decisions made in
time for that part of the Bill. I promise to try to do that but if I do
not, it will certainly be done within the Committee
stage.

Q
314Stephen
Timms: The Committee would have some difficulty debating a
part of the Bill where we did not yet know what the Government’s
decisions were. Should we be considering reordering our debates so that
we have all the information in front of us? Should we leave clause 12
until the Government have decided what they are going to do about child
care? That may be a solution.

The
Minister of State, Department for Work and Pensions (Chris
Grayling): There is an important aspect to the debate that
all Committee members should bear in mind. This is fundamentally a Bill
that enables and paves the way for a number of further decisions to be
taken. There are a number of elements. For example, clause 12 simply
makes provision for there to be a child care element. It does not set
things out in detail, nor would it be expected to and nor would it have
done in previous Bills. I have told all Committee members, and the
Secretary of State has just echoed this, that we will provide them with
as much information as we possibly can. We will set out intentions
right the way through, but this is still fundamentally an enabling Bill
and we are discussing measures that create the framework and not the
detail itself.

Stephen
Timms: Chair, it is not possible for the Committee to do
its work if it does not know the Government’s
decisions.

The
Chair: This is an issue for a programme motion if parties
disagree about it. The Committee has passed a programme motion which we
are working to and if there is disagreement about how to proceed, it is
for

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someone to move another motion at the appropriate time so that the
Committee can consider whether it wishes to change the existing
motion.

Q
315Sheila
Gilmore: I was hoping that the Secretary of State could
give us more information on how he intends to administer claims and
payments for housing benefit and mortgage interest under the universal
credit. For example, how will rent levels be determined without the
local expertise we currently have with it being administered
locally?

Mr
Duncan Smith: The best way of describing this is to
say that we do not have plans to change the way we do the local end of
it. I do not think there will be any change to the way we are doing
that at the moment. I do not foresee that at all. What we will take
from that is what we then take into universal credit. The plus points
about moving housing benefit into universal credit for people on the
ground are enormous. One of the great concerns that I find endlessly,
as I am sure Committee members do in their constituency offices, is
that our surgeries are full of lone parents, and often others, who have
gone into work for a while and then had problems. When they have come
out of work, they have found that it has taken more than a month, or
whatever, to get their housing benefit reinstated. So for that period
they have been materially worse off.

I was
determined to take housing benefit into the new system, because the
beauty of universal credit is that under the system, housing benefit
will automatically be adjusted. If people are no longer in work, for
reasons beyond their control, it will be adjusted
immediately—they will not have to wait. That will hugely
advantage them financially. In addition, one of the problems with
people re-entering the world of work after a difficulty is that they
carry with them a wage scar. If you leave work and afterwards find
yourself worse off, the first thing you will say to most people you
know is, “Don’t bother with that, because it’s
nothing but pain and heartache.” So people will try to avoid the
process.

The measure
should, therefore, act as a peculiar reverse incentive. People will
say, “Well it didn’t work that time, but I’ll keep
going and try again, because I wasn’t materially worse
off.” Using the existing systems, on the ground, of assessment,
we should be able to take this through and use it through universal
credit. It will provide a net benefit to everybody who is going into
work and falling out of it.

Q
316Ms
Buck: I think that is absolutely right in terms of
uncertainty in housing costs and so on. But will you clarify how the IT
system will accommodate that? Is that going to be easy, given that most
of the real-time adjustments are around earnings? What implications
does that have for
IT?

Mr
Duncan Smith: We do not think that it has huge
implications; we think that it will work very well within the real-time
system, because that adjustment will be picked up automatically. If we
end up with a monthly resolution, we will pick it up in a short space
of time, so we do not anticipate that problem. It is not a problem that
has been flagged up to me. It is a net, net, net positive. If we can
get this right, that alone will have a huge effect on the damage that
has been done to families who have, tragically, just lost work and
found themselves worse off.

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Q
317Ms
Buck: May I ask a couple of questions about the social
fund, and the devolution of community care grants and crisis loans? I
would be interested to know your thoughts on three issues. First, local
authorities will have responsibilities for administering the community
care grants. Will there be devolved administration costs when that
provision moves away from the DWP?

Secondly,
witnesses have raised a concern about the postcode lottery element. On
the one hand, there is scope for closer local engagement having a
positive effect—that point has been made, I think. On the other,
unless you issue guidance, there will be a whole variety of different
practices. People will not be clear—literally from one street to
another—what entitlements they may have.

Finally, what
will happen to that significant minority of people who will, for
different reasons, move around? Inner cities and seaside towns, for
example, have a highly mobile population. For all kinds of reasons,
people may be temporarily in one local authority, but have come from
another a few weeks before. Without clear guidance, the receiving local
authority might say, “We have no duty here and we will not be
interested in paying for
you.”

Mr
Duncan Smith: I think the right thing is to localise
the provisions. I know that there is talk about a postcode lottery; I
have never felt that the postcode lottery applies to everything. I
understand from being a politician, and from having been in opposition
myself, that the postcode lottery is a good thing, generally, to whack
Governments with when they are making changes such as these. It is a
little unfair to do that in this case. Different communities differ in
intriguing ways. Even my area has differences within a mile and a half
in how different types of people are living, where they are living and
what conditions they are living in across that piece.

We have had a
real problem with this provision. On the crisis loans, with the distant
telephone system, we have seen a threefold increase in demand. That
growth happened before the recession, which has, of course, made the
situation worse. Before the recession, we saw a huge growth, and most
of that was because when you do a distant, telephone-based system, you
can never truly understand what the circumstances of the individual
are. Maybe they did not need a loan. Maybe they needed a grant. You do
not
know.

The
second one, being paper-based, is incredibly complicated and difficult
to understand and, again, is somewhat dislocated from where they are
now. If we use people in the local area, which is where I think that
local authorities have a huge role to play, they should at least
understand the person sitting or standing in front of them and what
their real need is. It also provides an opportunity for them to
identify somebody who has a problem. They can then move them across on
to the right system and maybe get them reassessed. There should then
perhaps be a recommendation that they should be on the Work programme
and getting their mental health conditions or drug or alcohol abuse
sorted. In some cases, we have people that are getting 20
separate loans in a row, and they are just using it to sustain their
lives in an unsustainable way. By and large, we think that this will
succeed in helping to understand the nature of the loan and the nature
of the grants, and we think that this will certainly work much better.
I

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recognise the differences between communities, but the job of local
authorities is to ensure that they understand their own
communities.

Q
318Ms
Buck: And they will be funded to able to do this much more
intensive
work?

Mr
Duncan Smith: This is not a cuts agenda at all. This
is a transference, so that they can actually administer it better. We
are transferring what we would normally do now, and I think that they
will do it much better than we do. I will be honest and say that I do
not think that we do it well at all. Everyone says, “What if
they get fewer loans?” but the point is that, right now, all we
do is sit at the end of the telephone and fire out a loan to somebody
that we do not know. In the local area, maybe they will look at them
and say, “You’re on your second or third time here. You
simply don’t need a loan. We need to do something else with you
to try and sort your life out.” Getting hold of the human being,
rather than the figure, is what it is all about. I know that the
postcode lottery thing is often seen as difficult, but I think that
this is a positive rather than a
negative.

Q
319Ms
Buck: And we can protect against local authorities saying
that this is not their duty with particular
individuals?

Mr
Duncan Smith: It is their
duty.

Q
320Ms
Buck: Whose duty would it
be?

Mr
Duncan Smith: It is a moral
duty.

Q
321Ms
Buck: If somebody is moving from one part of the country
to another, how can we deal with
that?

Mr
Duncan Smith: They have to pick it up as they move
across. If that individual moves across with a problem, they will have
to make an application to them over that situation. Their situation
will be relevant to the area that they live in. Sorry, I thought that
you said there is no duty if the local authority has no care for it. I
do not think so. I have talked to DCLG and the Secretary of State, Eric
Pickles, about that, and he is clear that he thinks that it is a great
idea and that they will have a real chance to get connected to the
people in their communities. People who are involved in housing estates
know who is on those estates, for example. We could plug into an awful
lot of local information about the way that people are, and get it
sorted out. It seems to me that the way that we are doing it currently
is all
wrong.

By
the way, the changes were made at the time, because they were going
into jobcentres and it was all wrong, went in the wrong direction. It
was right to change it then, but it should have gone local, to the
local authorities, not national, to the
telephone.

Q
322George
Hollingbery: Secretary of State, I think that that is one
element of the social fund that is being replaced, and, within
universal credit, there will be budgeting on account, which also fills
part of that purpose. We have received a lot of evidence that the
former part should be ring-fenced within local authorities and that
local authorities apparently cannot be trusted to it properly. Do you
agree with that?

Column number: 165

Mr
Duncan Smith: I understand the debate about
ring-fencing, and it easy to have a knee-jerk reaction and say we will
not trust local authorities, because they somehow do not have the best
interests of the people who live in their area and only a national body
like us, run by a man like me, can possibly ever care enough about
people on the ground to get it right. Somehow my experience over the
past few years has told me that that is not altogether true. I am not
saying that the person who was here before me did not care as much
about this; I think that they did. The problem is how you can affect
lives when you are sitting in Westminster, and you are trying to deal
with somebody who is metaphorically a million miles away from you in
every way. You need somebody on the ground to recognise their condition
and somebody on the ground to deal with
them.

All
the conversations that I have had with leaders from councils, and also
with Eric Pickles and others, is that if you actually give local
authorities a real responsibility for some of the most difficult and
worst-off people in their community, by and large they will seize it.
It gives everybody in that community a chance to say, “You have
to discharge your responsibility as a council to do this properly,
because if you don’t, it’s time for a change.”

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That is really important. I genuinely believe that I know of no council
that got elected to do worse for the people that live in their
area.

Q
323George
Hollingbery: And the element within universal
credit?

Mr
Duncan Smith: You are right about
it.

The
Chair: We are up against the clock, but the last question
is from Jane
Ellison.

Q
324Jane
Ellison: I was going to ask about the under-occupation of
social housing. We have heard a range of different views and concerns
this afternoon. One was about the lack of smaller
properties—

The
Chair: Order. I am afraid that the clock has
beaten us. That brings us to the end of the time allotted for the
Committee. I thank the Secretary of State for coming before us and
giving
evidence.

Ordered,
That further consideration be now adjourned. —(Miss Chloe
Smith.)